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Banker: According to Section 3 of the Negotiable Instruments Act the term

banker includes any person acting as a banker.

Customer: Though customer has not been defined under any Banking law in

India, but in certain legal cases courts have defined Customer. As per that a

customer is a person who has some kind of account, such as deposit or currentwith a bank or has some similar relation with a bank.

Customers can be categorized as under

(a) Existing customers

(b) Former Customers

(c) Frequently availing banking facilities but not having account

(d) One time Visitor

(e) Potential customers

Technically (c) & (d) types are not the customer of a bank. In such case though

bank is liable for the transaction but legal relationship is not established. (e) type

will be treated as customer in case, duly filled account opening form is accepted

by the bank for opening account.

Legal Requirements to be qualified as Customer:

Customer should be a major/Customer & is of sound mind

He should not be debarred under any law

Offer and acceptance

Transaction between two parties

Should have an account

Dealing of banking nature only

A person, a company, a society or any legal entity

RELATIONSHIP: The relationship between a banker and a customer depends on

the transaction taking place between them. In other words it would depend upon

product/service provided by bank to its customers. The primary legal relationship

between a banker and customer is based on contract as per Contract Act, 1872.

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However, depending upon the transaction other laws may come into effect. Legal

relationship between Banker & Customer is normally of two types:

In terms of of Banking Regulation Act : Accepting of deposits for the

purposes of lending. Thus the relationships arising out of these two main

activities are known as General Relationship.

1. Debtor Creditor

2. Creditor Debtor

In terms of in Sec.6 of Banking Regulation Act: Relationship arising

out of the activities mentioned in Sec.6 of the act is termed as special

relationship.

The relationship developed between a banker and customer involves some duties

on the part of both:

DUTIES AND OBLIGATIONS OF BANKER:

Duties of a banker:

Duty to maintain secrecy/confidentiality.

Duty to honour cheques/commitment made by the customer

Duty to collect cheque/bills on customers behalf.

Duty to provide related services.

Duty to act as per the directions or act as a man of ordinary

prudence.

Duty to submit periodical statements/information

Duty to protect the interest of customer

Duty to pass on any benefits derived out of transaction

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Circumstances under which banker can disclose information of customer's

account:

Under compulsion of law.

Under banking practices.

For protecting national interest.

For protecting banks own interest

Under express or implied consent of the customer

Rights of a banker:

Right of General Lien

Right of Set-Off

Right of Appropriation

Right to Charge Interest, Commission, Incidental Charges

DUTIES AND OBLIGATIONS OF CUSTOMER:

RIGHTS OF CUSTOMER:

To deposit money in his account

To demand repayment by issuing cheque or written order properly in

proper time and place

To get statement of account in agreed manner

To stop payment of his cheque

To give standing instruction

To claim interest on his deposit balance in the interest bearing

account

To claim damages for any loss or damage caused due to wrongful

dishonor of his cheque by bank

To claim money when the payment is not made in due course

To have secrecy of his account etc.

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Duties of Customer

To pay remuneration to the agent

Not to prevent his agent from performing the duties/ acts assignedto him under the contract and for which remuneration is payable.

Indemnify for the cost incurred by agent.

Do the transaction properly and in time

demand payment in written within banking hour

Abide by the laws

keep his cheque book/ Instruments safely

Must inform the bank on time for any loss of cheque leaf etc.

Termination of relationship between a banker and a customer:

Death, insolvency, lunacy of the customer.

Closure of the account by customer

Liquidation of the company

Closure of the account by the bank after giving due notice.

Completion of the transaction.