Before going to examine the relationship between the Banker and the customer it is very necessary that one must understand the two terms Banker and Customer.
“One claiming to be a banker, he must satisfy two important conditions. They are
“A customer is a person who has an account with a banker and he keeps either a current or a deposit account with the bank”.
According to this theory if a person operates his account only one time, or takes too much long time for further transaction, is not a customer.
The modern view has incorporated the elements of both “The Account Theory” and “Duration Theory” and amended them according to modern times. After innumerable experiences the bankers have been adopting certain procedures to safeguard banking business so that better services could be rendered to the customers. Now it has become statutory obligation on the banker to procure all the information relating to the customer. The decided case laws of English and India in the modern times say that even a single transaction can constitute a person a customer of a bank.
To constitute a customer a person must have a bank account which may be a savings, current or fixed deposit operated in his name by making the necessary deposit of money.
A person is regarded as a customer even if there is a single transaction. A single transaction is sufficient to treat him as a customer.
Frequency of transactions is anticipated but it is not compulsory, and it is insisted upon.
The dealings between the banker and the customer must be of banking nature. Operating safe deposit locker does not come under banking nature. Therefore a person who has a bank locker is not a customer because in this banker performs the duties of bailee. Similarly if a person takes change for hundred notes or so from bank cannot become a customer.
Generally we can compare the banker and customer relationships with the other relations in commercial transactions. There are mainly three types of relationships.
The relationship between the banker and the customer is that of debtor and creditor, the relationship differs from similar relationship arising out of ordinary commercial debts in the following respects
In case of ordinary debt the debtor pays the amounts on the specified date or earlier or whenever creditor demands. But in case of deposit in the bank, the debtor (bank) is not bound to pay on his own account because the banker is not an ordinary debtor; he accepts the deposits with an additional obligation to pay only when it is demanded. Hence a banker is considered to be Privileged debtor.
Case law: Foley vs. Hill, Joachinson vs. Swiss Banking Corporation.
A commercial bank having number of branches is considered to be one unit. The locality was an essential part of a debt due by the banker to the customer and the banker’s obligation to repay the debt was confined to the place where the account was kept.
Case law :Joachinson vs Swiss Banking Corporation.
Customer can withdraw the money only during the business hours of the Bank.
According to section 5 (b) definition for the banker, the demand for refund of money must be made through proper method followed by custom or usage amongst bankers i.e. either by cheques or drafts or orders otherwise. It should not be oral. 5. Partly demand:- The demand by the customer may be any part of his debt or deposit.
Points of difference between, bank-customer relationship and commercial creditor debtor are :
|Creditor - Debtor||Bank - Customer|
|The borrower is a debtor.||Bank, though a borrower is a dignified debtor.|
|The amount is a “debt”.||It is styled “deposit”.|
|Debtor goes to Creditor, borrows as per general rules or custom.||Customer (Creditor) goes to the Bank, deposits and gets challans for such deposits.|
|The loan may be secured or unsecured.||The Deposit is always unsecured.|
|The loan may be paid back at any time or place, by mutual arrangements.||The bank will pay only on demand, at a particular branch. The demand should be in writing as in cheque etc.|
|The period of limitation is 3 years from the date of the loan.||There is no period of limitation for deposits. Period starts when demand is made by the customer. Not otherwise.|
According to Article 22 of the limitation Act 1963 the period of limitation to the deposit is three years , which starts from the date of demand by the customer and not from the date of deposit and for a fixed deposit, it applies from the date of maturity . But in case of ordinary commercial debts the period of limitation starts from the date of debt. So this is also a peculiar feature of banker and customer relationship.
One of the important relationships between the banker and the customer is the relationship of agent and principal. The banker acts as an agent for the customer – principal in the following circumstances.
In the above circumstances the banker acts as an agent for his principal customer. The law of Agency applies to both the parties in such circumstances. The banker as an agent is bound to conduct the business of the agency with reasonable diligence. There is a liability on the part of the negligence, want of skill or misconduct but not in respect of loss or damage which are indirectly or remotely caused by such negligence, want of skill or misconduct. It is the duty of the agent to communicate his principal in cases of difficulty, to use all reasonable diligence in communicating with his principal and seeking to obtain his instructions. Section 182 of Indian Contract Act 1872 defines Agent and Principal. An Agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done or who is represented is called the Principal. Sections from 182 to 238 of Indian Contract Act 1872 deal with “Law of Agency”. All these provisions are applicable in case of the relationship of the banker (agent) and Customer (principal).
In certain occasions, a customer may entrust his valuables to his banker for the safe custody. In such cases the banker becomes Bailee and the customer as Bailor. The provisions of chapter in (sections 148 – 181) of the Indian Contract Act, 1872 shall apply to the banker bailee and the customer bailor.