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Banker, Customer : Meaning And Definition

Banker: The expression Banking in the simple sense means carrying on business with money. The term Bank denotes any person or firm or company, which transacts banking business. A bank is an institution which deals with money and credit. It accepts deposits from the public, makes the funds available to those who need them, and helps in the remittance of money from one place to another.

There is no satisfactory definition, since it is very difficult to define the term Banking or Banker. However, many attempts were made to define the term. Following are some of the prominent definitions :

  1. General Definition : “A bank is what a bank does”. It implies that the nature of a bank can be better understood by studying the functions performed by a bank. Among all definition, this definition is the simplest.
  2. Negotiable Instruments Act, 1881 : According to section 3 of the Negotiable Instruments Act 1881. Banker includes a person, corporation or company acting as a banker”. This definition is not satisfactory.
  3. The Banking Regulation Act, 1949 : Section 5 (b) of the Act defines the term Banking as “accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise”.

Ingredients or constituents of the definition :

  1. The very purpose of the acceptance of the deposits is for the purpose of lending or investment.
  2. The acceptance of deposits is from the public.
  3. These deposits can be withdrawable through cheques, drafts, orders or otherwise.

This definition covers the most important functions viz. the borrowing (acceptance of deposits of money from the public) and lending (sanction/payment of loans and advances to the public viz. individuals, traders, industrialists etc.) and hence it is regarded workable and is accepted.

Customer: The expression ‘Customer’ in the simple sense means, one who transacts himself with the bank subject to certain terms and conditions as imposed by the Banker. In other words, a person, who maintains an account with the bank may be regarded as customer.

The term ‘customer of a bank’ has not been defined in the Banking Regulation Act, 1949 or any other Act. By the term it is generally understood or mean an account holder of bank. But this general understanding of the term has been qualified by banking experts and judgements of law courts. Hence, there is no satisfactory definition for the term ‘customer’. However, some attempts were made to define the term ‘customer’ as stated below: -

  1. Sir John Paget : Sir John Paget defines ‘Customer’ as “To constitute a customer, there must be some reasonable course or habit of dealing in the nature of regular banking business”. According to him, mere opening an account with bank would not confer the status of customer. There must be a regular course of dealing with the bank, to be designated as a customer. However, this view was subject to criticism on the ground that, this definition puts emphasis on duration of dealing with a bank as an account holder. It is not correct to say that there must be regular course of dealing with Banker.
  2. Dr. Hart’s Definition : According to Dr. Hart, “a customer is one, who has an account with a banker or for whom a banker habitually undertakes to act as bank”. According to him, a single transaction is sufficient to constitute a customer. Therefore, to constitute customer, the following two conditions are to be satisfied :
    1. He must open an account with the Bank to have a dealing with the Bank,
    2. The nature of such dealing must be a form of a banking transaction.

The Kerala High Court in Central Bank of India Ltd. Bombay vs Gopinathan Nair & others1) has laid down : “Broadly speaking, a customer is a person who has the habit of resorting to the same place or person to do business. So far as banking transactions are concerned he is a person whose money has been accepted on the footing that the banker will honour upto the amount standing to his credit, irrespective of his connection being of short or long standing”.

In this very sense the statement in the question has been made that “to constitute a customer there must be some recognizable course or habit of dealing in the nature a regular banking business”.

AIR 1979 Ker. 74

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