02 Banker Customer Relationship

Caselets:
1.

Who is a Banker
Banker is defined under Section 5(b) of The Banking Regulation Act.
What are the essential characteristics of a banker to satisfy this definition?
i
ii
iii
iv
v

2. Under which of the following situations, the person will not be treated as a customer of the State
Bank of India: Tick Mark _/
i SK Faliman has been maintaining a savings bank account with State Bank of
India for the last two weeks.
ii Sridharan has a fixed deposit receipt for Rs.5,000 that he has been made only
three days ago.
iii Vinit Chopra has purchased demand drafts for eleven times, has got DDs issued
five times, in the last two years from the same branch of Bank on paying cash .
iv Sewa Singh has been holding 500 shares of SBI for the last 25 years.
v Rajinder Kumra signed the account opening form with satisfactory introduction
and other formalities and deposited a other bank cheque of Rs.15,000 in his
favour for collection as initial amount for the account on 15.09.12 to be sent
for clearing . Is he a bank customer on 15.09.12?
3.

Which statements of the following are correct and why about KYC Norms:
a. KYC guidelines are issued by SEBI for Banks in India.
b. The purpose is to get legal protection for the collecting banker u/s 131 of NI Act.
c. Knowing the customer means whether he is the same person that he claims to be.
d. The introducer has a criminal liability in case the customer introduced by him commits
any fraud or wrong doing with bank or other customers thru his account.
e. The introducer has only a civil financial liability in case the customer introduced by him
commits any fraud or wrong doing with bank or other customer
f. The introducer has no financial or other liability to the bank or third parties unless he is a
party to the fraudulent transactions
g. The KYC norms are to safe guard the country from laundering of drug money or other
illegal money or to detect suspicious disruptive activities.
h. The KYC norms also help in checking the growth of Benami transactions and for
monitoring large value transactions to avoid payment of taxes
4. As part of KYC, banks insist on documentary proof for identity and residence. Tick mark the
documents acceptable as
Proof of identity:
Proof of residence:
1

i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.

A Valid Driving Licence

An Election ID Card
A Ration Card with photo
A Valid Passport
A PAN Card
A Credit Card with Photo
Allotment Letter/ Rent Agreement
LIC Policy For Last Two Years
Credit card statement
Telephone Bill Electricity Bill
Employer certificate/ID

i. Driving Licence
ii. Election ID Card
iii. Ration Card with photo
iv. A valid passport
v. PAN Card
vi. A Credit Card with Photo
vii. Allotment Letter/ Rent Agreement
viii..LIC Policy For Last Two Years
ix. Credit card statement
x. Telephone Bill Electricity Bill
xi. Employer certificate/ID

5. Comment which one of the following is correct and why?:

a. Banks are required to issue demand drafts, for Rs.50,000 and above only by debit to customers
accounts or against cheques and not against cash.
b. The requirement for furnishing PAN stands increased uniformly to Rs.50,000/- or above per
transaction for all cash deposits in accounts.
c.

The banks are required to keep a close watch and record of cash withdrawals and deposits for
Rs.10 lakhs and above in accounts in a separate register as well as report transactions of
suspicious nature with full details in fortnightly statements to their controlling offices.

6. State the nature of relationship between banker and a customer in the following types of
dealings with the bank:
Sr.

Nature o f account

A Customer has opened a no frills savings bank account with

zero balance with the bank.
A Customer has a locker facility with the bank and has deposited
Rs.10,000 in fixed deposit to avail this locker facility.
A customer has deposited an outstation cheque with the bank for
collection and credit to his account with the bank.
Customer has given some document for safe custody to bank

ii
iii
iv

7.

Role of
Banker

Role of
Customer

Give your observations:

Padam Singh Rana had an overdraft with HDFC Bank at Noida branch and a Savings bank
balance at New Delhi branch. On non payment of overdraft balance of Noida Branch even after
expiry of notice, his S/B deposit balance at New Delhi branch was adjusted towards overdraft
amount. Whether bank is justified in this action and why?

8.

At two different branches of HDFC Bank, balances in accounts were as under : Branch A Rs.
50000 Branch B Rs.20000. Customer issued a cheque for Rs.51000 on branch A for advance
payment of purchase of property worth 15 lakh. This cheque was dishonored by the branch
ignoring the fact that he had enough balance at the other branch. He lost his reputation and could
not buy property and claims Rs.15 lakh for this loss and another 10 lakh for reputation loss.
Discuss.

9. Sam issued a cheque for Rs. 15000 on 12.09.12. He had Rs.14,500 balance in SB account and
had deposited cheques for Rs.20,000 on the morning of 09.09.12 in this account that had not been
returned un paid. But the cheque for Rs.15000 was dishonoured by the bank due to oversight of the
executive who credited the amount of cheques to some other account. Is bank liable to customer?

10. Ram Kapoor had fixed deposit of Rs.20,000 with the bank branch. He issued a cheque on his
savings bank account for Rs.50,000 that had a balance of Rs.49,000. at the same branch. The
cheque was dishonored by the bank. Discuss rights and liabilities of both the parties.

11. Baldev Raj, a reputed businessman had enjoyed overdraft facility up to Rs.20,000 from time
to time for the last four years with SBI, Noida branch without any loan agreement in writing due to
his reputation and relations. The new branch manager returned a cheque for Rs.50000 as the credit
balance in the account was Rs..45000. On complaint by the customer, the branch manger replied
that there was no contract in writing, so bank is not liable for consequences for returning the
cheque. Discuss the liability of the bank.

12. Anil Ambani got a compensation of Rs.10 lakh from the court for wrongful dishonour of a
cheque for Rs.1,25,000 drawn by him. Would there be any difference in compensation if the
cheque amount would have been Rs. 1250 only ?

13. Will dishonor of cheques by the bank be justified and why in the following situations?
i. Cheque dated 19.09.12 presented for payment on 18.09.12
ii. Cheque dated 15.03.12 presented for payment on 18.09.12
14. Discuss whether the banker is lawfully justified in disclosing the customers information:
i.
The statement of account is given to the Income Tax Inspector on his instructions.

ii.

The Sub inspector from a local police station is shown the account details for three years
of a person under criminal investigation.

iii.

The credit information is passed on to another bank and based on this the other bank
rejects his loan application.

iv.

The balance in account is disclosed to the wife of the depositor without his consent.

v.

The information of account and facilities is disclosed to the guarantor before signing the
guarantee.

15. Which one of the following is correct in respect of right of Lien:

a. A scooter mechanic can hold the scooter repaired by him if the repair charges have not
been paid. It is not a case of particular lien.
b. If debt is not paid, Bank can sell the securities under lien without giving a reasonable
notice for sale to the debtor.

c. Bank can exercise lien for debt in single name on fixed deposit in joint names
d. Bank has a lien on safe custody articles like shares or bonds, or money tendered for
remittance to some other person or securities held in trust or securities left with bankers
by mistake.

16. Which ones of the following are correct in respect of right of set off:
a. X has to pay overdraft of Rs.50,000 but has defaulted. Bank can recover this amount
from a joint account in the name of X and his wife Y.

b.

X Enterprises (X is the proprietor of this firm ) owes Rs.10000 to bank. There is a credit
balance of Rs.12,000 in SB account in personal name of X. Bank can exercise right of
set off.

c. Money owed by father can be recovered from the account of his minor son under
guardian ship of the father.