Depending on the type of transaction, a banker’s relationship with a customer may vary. Relationship Between Banker and Customer involves obligations and rights for both parties. Bankers and customers have more than just a debtor-creditor relationship. Their relationships, however, go beyond this.
Banker/ Who is a banker?
Bankers are those employees of the bank who legally provide their customers with the bank services they desire. Deposits of money from the public are accepted for lending, investment, and withdrawal by way of letters of credit, drafts, or orders.
1.Banking is defined as having the following characteristics.
2.Both functions are essential for a banking company to perform.
3.Acceptance of the deposit.
4.An important term is the deposit of public money. In the banking industry, only money can be deposited. The world public believes that any person who offers money for such a purpose can deposit it with a bank.
5. A withdrawal time and method were also included in the definition. If the depositor makes a written demand or if both parties come to an agreement, the deposit should be returned to the depositor.
The customer /Who is a customer?
Clients are anyone who holds a legitimate bank account and uses it to conduct transactions, to borrow money, or to receive any other form of bank service. An account holder whose banker provides him with the services of a bank account holder is considered a customer.
Following are the requirements for forming a customer;
1.By making a necessary deposit, he needs to operate his bank account in his name, whether it is a 2.savings, current account, or fixed deposit.
3.In a banking business, the customer and banker must deal with each other. Customer-banker 4.relationships include:
5.Relationship types between banker and customer
6.Relationship between Banker and Customer
There are three types of relationships between a bank and a customer;
2.Trusteeship by a banker.
3.Agent as a banker.
Other responsibilities a bank has to its customers
Bankers assume the role of debtors when opening a new account. If a depositor has a credit balance on his account, he is the banker’s creditor.
Whenever the customer account is overdrawn, the relationship with the customer is reserved.
As soon as a loan has been taken from the banker and repaid, the banker becomes a creditor of the customer.
Trusteeship by a banker
Bankers are usually viewed as creditors by customers in regards to reports of deposits made by letter, however, they may also act as trustees in certain circumstances.
Trustees hold money or assets for benefit of another individual called beneficiaries.
As an example;
The letter acts as a trustee for the customer if he deposits securities with the bank for safekeeping.
Agent as a banker (Relationship Between Banker and Customer)
For the convenience of his customers, a banker functions as an agent.
The customer has the right to buy or sell securities on his behalf, to collect checks and cheques on his behalf, and to pay various dues.
Customer special relationship/banker’s obligations:
Bankers and their customers are most often debtors and creditors. Following are the additional obligations imposed on the banker by the special features of the relationship described above.
Honoring the check/cheque
Any deposit taken by a banker is a liability that can be repaid at any time. The bank is therefore required by law to honor the customer’s check/cheque in the normal course of business.
A negotiable instrument is defined in section 31. According to the Bankers Ordinance of 1881, a banker must honor a customer’s check as long as the following conditions are met:
- The customer’s funds are sufficient.
- Checks/cheques have been written correctly.
- Check or check presentation should be correct.
- There should be a reasonable collection time.
- A properly drawn check/cheque.
- Keeping customer information confidential
- Bankers are responsible for maintaining the highest level of confidentiality regarding their customers’ accounts.
If the following reasonable situation does not occur, then keeping secrecy means that the account books of the bank will not be disclosed to the public or government officials:
Legally required information discloser.
Bankers’ practices and wages allow disclosure. Certain information and the following circumstances are permitted to be disclosed by bankers as usual practice and wages.
When the customer expresses or implies consent.
- Reference from a bank.
- Disclosure is a public duty.
In all of the world, the relationship between bankers and their clients is one of the most mutual.
Together, they cannot survive. These days, customers come in all shapes and sizes. Clients whose needs are regular like yours or mine, brokers, one-second party banks, etc.
The Indian banking sector plays a vital role in the nation’s economy. It is not politicians, entrepreneurs, or government that ruin our country. This country is run by its workers and taxpayers who help the country advance. Among our society’s most important wheels are both bankers and customers.
Ladies and gentlemen, this article intends to explain to even a six-year-old what type of relationship a bank has with a customer. Let’s get right into it if you find that interesting.
In the relationships between these two, there is absolute mutualism, just as when two friends meet for lunch. There is nothing black and white about this. In the gray area, all transactions occur. Depending on the type of client and the type of service they request, there are different types of this relationship.
Relationships between a banker and a customer include:
These relationships can be divided into two broad categories:
1.Relationship in general:
Bankers provide a wide range of services to their customers under the General Relationship.
2. Relationship of Special Interest:
The banker has an obligation and customer instructions regarding the Special Relationship. In the following sections, we will explore both relationships.
Customer-banker relationship in general:
Mutual correlations can be divided into 6 different sub-types by this type.
1) Debtors and creditors relationships:(Relationship Between Banker and Customer)
Customers borrow money from creditors. A debtor is a person who receives a loan, and a customer is a person who uses a loan.
Consider the case of Harshad taking a loan of Rs 1 lakh from State Bank Of India (SBI). SBI is the creditor, and Harshad is the debtor.
Suppose Harshad has a credit balance of $100 in SBI. Here, SBI is the debtor, and Harshad is the creditor.
2) Trustee-beneficiary relationship:
The banker usually acts as trustee, and the borrower is the beneficiary of the loan, when funds or valuable assets are pledged as security.
SBI loaned Harshad Rs 1 lakh in exchange for gold. Beneficiary is Harshad, trustee is SBI. Relationships between banks and customers become grey as a result.
3) Exchanging principals and agents:
Last week, he purchased a new car. Harshad requested an EMI of 20,000 rupees from Lexus company, through his SBI account.
His post-graduate studies will also be supported by a scholarship of Rs 5,000. SBI transfers a large amount of money to Harshad’s account. SBI deals with Harshad’s bank accounts here. The SBI thus takes the role of agent, while Harshad takes the role of principal.
In an EMI and interest payment relationship, the banker and customer are much closer.
4) Lessee and Lesser:(Relationship Between Banker and Customer)
The SBI lent Harshad a safe locker where he deposited money. Harshad has been depositing money in the locker regularly since receiving it from SBI. A lessee is Harshad, and a lesser is SBI.
5)Bailor And Bailee:
Firstly, it is important to know that a bailment agreement is written between a banker and a customer whereby the customer provides the banker with a valuable asset or property for a specific period of time (not for possession).
SBI received Harshad’s Rolex watch for six months. For six months, SBI will be responsible for the Rolex. With Harshad as the bailiff, and the SBI as the bailee, SBI becomes the bailee.
6) Client and Advisor:
Ashwin is Harshad’s brother. SBI is Ashwin’s bank. It goes without saying that SBI acts as an advisor to Ashwin and Ashwin as a client. SBI advises Ashwin on schemes and PSU bonds in which he can make a profit. This is a customer-banker relationship between Ashwin and SBI.
Bankers provide customers with a wide range of options through general relationships.
1) Banks must honour checks:
If the customer does not have enough money in his/her bank, then the banker is required to provide a cheque equal to the amount in the customer’s account.
The customer must also comply with some obligations. A bank’s Account Opening form specifies all the rules and regularities that must be followed when opening a new account. Inappropriate behavior by the banker is not tolerated if the customer’s cheque is not provided. Bankers and customers have a trust-based relationship.
2) Confidentiality Obligation of Banker:
It is the banker’s absolute responsibility to protect all sensitive information, including account numbers and bank balances. If the wrong hands receive the information, it may be detrimental to the customer.
The government authorities are fully entitled to examine a customer’s bank accounts even if the information is confidential. Banker-customer relationships are thus more secure.
3) Banker’s duty of keeping records: (Relationship Between Banker and Customer)
A banker’s duty is to keep records of all the payments, deposits, loans, and investments a customer makes. Authentic and clear records are needed. The client and the bank may be in trouble if the records show any irregularities.
Everyone must be financially literate in order to succeed in life. Finance is not a subject in our educational system. A person must learn banking as one of the mandatory practices. In the above article, we explain the responsibilities and rights of both bankers and their clients. I explain the concept from scratch in the simplest possible language.(Relationship Between Banker and Customer).