Banker Customer Relation

J N Nayak
TC LUCKNOW
 Learning Objectives

 Duties and rights of a Banker

 Lien, set-off and appropriation
 Difference between Garnishee order and
Income Tax attachment order
 Various types of customers & Banker
Relationship

Academy of Excellence Inventing Methods for Igniting Minds

 Banking

 The term “Banking” has been defined under the Banking

Regulation Act, 1949.
 According to section 5(b) of the Act, Banking means accepting
for the purpose of lending or investment of deposits of money
received from the public, repayable on demand or otherwise and
withdraw able by cheque, draft, order or otherwise
 Section 7(1) prohibits the use of words “Banker, Banking or
Banking Company”’ by a company other than a banking company.
 Section 7 (2 ) prohibits the use of such word by an individual or a
group of individual or a firm.

Academy of Excellence Inventing Methods for Igniting Minds

 Functions of Bank

Banking Regulation Act, 1949 section 6 ,authorized the

bank’s to carryout certain other transactions.

 Discounting of Bills
 Collection of Cheques and Bills
 Remittances
 Safe Custody of articles
 Hiring of Safe Deposit Lockers
 Conducting foreign exchange transactions
 Conducting Govt. Transactions.
 Issuing Letters of Credit and Guarantees

Academy of Excellence Inventing Methods for Igniting Minds

 Duties and Rights of a Banker

 Duty to maintain the secrecy

 Duty to honour the cheque, if the balance in the
account permit debit of the cheque and cheque
is properly drawn
 Duty to issue pass book, statement etc.
 Duty to collect the cheques, Bills etc

Academy of Excellence Inventing Methods for Igniting Minds

 Rights & Duties continued….

Under the following circumstances Bank is

under obligation to disclose the
customer information :-
 Under compulsion of law
 To protect national Interest
 In the interest of the Bank
 With the implied consent of the customer
 As per banking practices
 Information demanded by the Guarantor

Academy of Excellence Inventing Methods for Igniting Minds

 Rights of Banker

Followings are the primary rights of the banker:

 Right of General Lien

 Right of set-off
 Right of appropriation
 Right to act as per the mandate given by the
customers.

Academy of Excellence Inventing Methods for Igniting Minds

 Lien

 It is a right of the banker to retain the possession of

the goods and securities owned by the debtor until
the debt due by the customer is paid. ( Section 171
of indian contract act 1872 )
 The banker’s lien is an implied pledge and acquires
the right to sell the goods, which came into
possession in the ordinary course of banking
business.
 Any Specific Transactions like Locker, safe Custody
or if money deposited foe some specific purpose
are not subject to general lien

Academy of Excellence Inventing Methods for Igniting Minds

 Set Off

 Right of set-off is the right of a banker to adjust a

debit balance in a customer’s account, with any
balance outstanding to his credit in the books of the
banks.
 In other words, the banker has a right to mutually
adjust the two accounts of the same customer with
certain amount, one in debit and another in credit,
which is called right of set-off
 The account must be in the same name & same
capacity.

Academy of Excellence Inventing Methods for Igniting Minds

 Appropriation

 The customer, who deposits the amount, has

a right to clarify the purpose and account
against which the credit is to be given by the
banker.
 It means it is the duty of the customer to
specify the nature of the transactions.
 If he fails to mention the purpose, then banker
has a right to adjust the credit against the any
debit/ dues. This is called the right of
appropriation

Academy of Excellence Inventing Methods for Igniting Minds

 Banker customer relationship

 Customer Deposits.  Debtors

 Loan and Advances  Creditors
 Collection of Bills/ Cheques  Agent
 Purchase of DD/ MT/ TT  Agent
 Payment of Draft  Trustee
 Sale purchase of security  Agent
 De-mat Account  Trustee
 Safe deposit locker  Lessor
 Safe custody of Articles  Bailee
 Standing instruction  Agent
 Money deposited with specific  Trustee
purpose.
 Bank Guarantee  Indemnified.

Academy of Excellence Inventing Methods for Igniting Minds

 Garnishee order and Income Tax Attachment order

GARNISHEE ORDER
I.T. ATTACHMENT ORDER
 Issued by a court at the
 Issued by I. Tax Deptt to
request of the judgement
attach the balance lying in
creditor attaching the fund
the account of customer /
belonging to the
defaulter of the order
judgement debtor
issuing authority.
 The credit balance
 Credit balance available &
available at the time of
future credit in the account
order is attached
are also attached.
 Bank can exercise their
 Right to set off not available
right of set-off before
once order acted upon.
remitting to court
 present fund and any fund
 Fund which is lying with
which are to be credited to
the bank as a debtor to be
the customer account.
attached
Academy of Excellence Inventing Methods for Igniting Minds
 Continue

 Applicable
 If the order in single name, no
joint account balance can be proportionately to joint
attached. account balance also.
 Account of deceased  Account of deceased
customer is not atachable customer can also be
 Jt account with instruction attached
former or survivor can be
attached
 Personal account of partners
can be attached for firms’s
debt.

Academy of Excellence Inventing Methods for Igniting Minds

Academy of Excellence Inventing Methods for Igniting Minds