CHAPTER Three
Banker &
Customer Relation
Muhammad Ibrahim Sohel
BBA
Department of Business Administration
International Islamic University Ctg (Dhaka Campus)
Customer – Definition:
“To constitute a customer there
must be some recognizable
course or habit of dealing in the
nature
of
regular
banking
business”
- John Paget
It is known as “Duration theory”
Features of Customer
-
Have an account in a bank
-
Dealing with a bank
-
Dealing must be in the nature of banking business
-
Dealing may be of short or long duration
Relationship between a banker and
customer
Relationship
General
Special
Relationship Relationship
General Relationship
General
Relationship
Primary
Secondary
Primary Relationship
Debtors & creditors relationship:
-
Demand for payment
-
Demand at proper time
-
Demand in proper manner
Secondary Relationship
1. Trustee & Beneficiary relationship (at the time of
keeping valuables):
-
Bankers does not get ownership
-
It does not compensate the creditors at the
time of bank’s liquidation
-
Deposits carry any standing instruction –
(trustee & beneficiary) and vice versa
-
cheque deposits for collection (trustee &
beneficiary) and vice versa.
Obligation of the banker
1. Obligation to honour the Cheques:
-
Sufficiency of funds
-
Applicability of funds
-
Proper requirements for payment
-
No garnishee or attachment order
2. Obligation to maintain secrecy of
accounts:
a. Legal necessity – it will disclose if it is
required by;
-
Income tax act
Companies act
RBI act
Banking regulation act
Gift tax act
Order to court
Foreign regulation act
Garnishee Order
The obligation of a banker to honour his
customers cheque is extinguished on receipt
of on order from the court known as trhe
garnishee order
If a debtor fails to pay the debt due to his
creditor, the creditor may apply to the debtors
bank to issue this order so that the bank
account is frozen.
4/13/2015
10
Parts of Garnishee Order
1.Order Nisi :Directs the banker to freeze the
debtors account or seeks the banker to
explain why the funds in the account should
not be used for payment to the creditors.
2.Order Absolute: Directs the banker to pay
either the whole or part of the funds lying in
the account.
4/13/2015
11
Features of Customer
-
Have an account in a bank
-
Dealing with a bank
-
Dealing must be in the nature of banking business
-
Dealing may be of short or long duration
4/13/2015
12
b. Banking Practice:
1. Disclosure with customer’s consent
- Express consent (customer can instruct)
- Implied consent (guarantor)
2. Disclosure for banker’s own interest
- To bankers lawyer (recovery of dues)
3. Disclosure of request by other banks
- Can furnish data except the actual figures
4. Disclosure for public interest
- When it helps to find a criminal
- Person involves in Illegal activities
Consequences of wrong disclosure:

Liability to the customer:


Banker should compensate the loss due
to the wrong disclosure
Liability to the third party:

Banker should compensate the loss for
the wrong disclosure
Rights of a banker
1. Right of lien:
-
Lien is a right of the person who can retain the
goods of another in his position until a debt due
to him is paid.
-
Particular lien – on particular property.
-
General lien – Any property can be retained.
Conditions to be satisfied in lien:
-
Banker
must
property/security.
possess
-
Property/security must be in the name of
the customer alone.
-
The possession
legally.
obtained
by
the
banker
Exception to the right of lien:
-
-
-
-
Valuable accepted for safe custody.
Bill of exchange/other documents deposited for other
purposes.
Money deposited for special purposes like purchase of
securities
Documents/valuables left with the banker by mistake
Trust a/c operated by the customer against his
personal a/c.
Securities lodged with a banker for getting a loan
before sanctioning such loan
2. Right of Set Off:
-
Banker can exercise the right by
setting off a debit balance in one
a/c with the credit balance in
another a/c maintained by the
same customer.
Right of set off subject to the following conditions:
-
No agreement contrary to this right.
-
Formal notice to the customer.
-
Capacity of the customer must be same in all
the a/c’s.
-
Different branches of bank will constitute one
entity.
-
Banker has the option (customer can’t compel
the banker).
-
Banker can do this even after the receipt of
garnishee order.
3. Right of Appropriation:
-
Appropriation of amount will arise when a
customer;
-
Owes several debts to a banker and
-
His payment is not
discharge all his debts.
sufficient
to
4. Right of charge interest, incidental
charges etc:
-
Banker has the right to charge interest on
due from customers
-
It has the right to charge incidental
charges on customers a/c