Before we get into the Banker customer relationship, it is imperative for us to understand what is a BANK?
A Bank is an institution, incorporated with the authority and the responsibility to issue promissory notes which are to be circulated as money, also known as Bank Notes. They are also tasked with the responsibility to receive money, belonging to others, either in the form of deposits, for the creation of joint funds, that can be used by the institution, either for its own benefit, for providing long and short term loans, of dealing in notes, foreign, domestic, bullion, domestic bills of exchange, credits and remission of money, and with addition to these powers, of receiving deposits and authorized to make collections for the holders of the negotiable instruments, if the institution deems fit.
The Customer is defined as the one who has reposed faith in the bank by having opened an account and deposited assets, in the form of money or other means. Even an agreement to open an account, irrespective of the type of account, makes one a customer. Only an individual or an entity having an account with the bank can be called a customer.
Banker Customer Relationship
Let us look at the various banker customer relationship that exists between a bank and the customer.
Debtor-Creditor
This is the primary relationship between a customer and a bank. When a bank accepts a deposit, it becomes the debtor and the customer, the creditor, irrespective of the fact that the bank pays interest. However, as established by several judgments, the relationship is special and the features of such a relationship are:
- The customer cannot claim the return of the same notes or coins from the bank, which can repay a sum of equivalent amount.
- The depositor being a creditor is an unsecured creditor notwithstanding the fact that the deposits are insured up to ₹ 1 lakh per depositor by DI&CGC (BDIC)), the premium being born by bank @ 5 paisa per ₹100/- per year.
- The demand must be made by the customer in an approved manner only at the branch at which the account is maintained and also within normal business hours on the working day only. It is pertinent to add here that payment made outside business hours is not a payment in due course, thus depriving the bank of the protection available under Sec. 85 and 85A of the NI Act.
However, when the customer makes an overdraft payment, it makes them the debtor and the bank the creditor.
Trustee-Beneficiary
Banks also act as the trustee and the Customer the beneficiary. The occasions when a bank will become a trustee:
- An individual with no bank account deposits money with instructions of retaining it till further notice
- A customer instructs a bank to debit money from his account with the intention of utilizing it for specific purposes.
- When the bank manages the property of the customer.
Agent – Principal
The condition under which the bank agrees to accept bills, receipts on behalf of its customer, it becomes the agent of the customer. Under such circumstances as per sec 151 of the Indian Contract Act, 1872, the bank is advised to act with due diligence and skill in regards to the instructions of the principal. If the instructions aren’t followed, it has to make good of any loss arising of the transaction, as per Section 211 and 212 of the Indian Contract Act.
Bailee-Bailor
When a bank accepts an article form the customer, for safe custody, it becomes a bailee, in legal parlance, and is duty-bound to take absolutely good care of the article, bailed to it.
- Sec.152 of the Indian Contract Act states that the bank will bear no responsibility for the loss of the article if there is an absence of the contract.
- Sec. 151 of the Indian Contract Act, states that the bank has the right to a lien in return of the service provided.
- Sec.170 of the Indian Contract Act states that the bank has the right to hold on to the article until the remuneration is not paid unless there is a contract to the contrary.
Lessor-Lessee
In the case of hiring out lockers to the customer, the bank becomes the lessor and the hirer the lessee. The relationship is similar to that of the Landlord and the tenant. The lesser is not responsible for the loss of any article if not mentioned otherwise in the lease deed and the lessee is advised to ensure all valuables, stored in the locker.