Banking: LESSON 10 BANK CUSTOMER RELATIONSHIP: CONCEPT AND CASES
The relationship between a banker and a customer depends on the activities; products or services provided by bank to its. Definition and Features of Bank Different Types of Banks What are Various Kinds of Banks? Commercial Banks Definitions, Primary Secondary Functions. 2. SPECIAL RELATIONSHIP. GENERAL RELATIONSHIP BETWEEN. BANKER AND CUSTOMER. 1. PRIMARY RELATIONSHIP. 2. SECONDARY RELATIONSHIP.
It is applicable in respect of deposits that are due for payment. The right of set off enables bank to combine all kinds of credit and debit balances of a customer for arriving at a net sum due. The right is also available for deposits kept in other branches of the same bank.
The right is also available for time barred debts.
Deposits held in the name of a guarantor cannot be set off to the debit balance in borrowers account until a demand is made to the guarantor and his liability becomes certain. Banks cannot set off the credit balance of customer's personal account for a joint loan account of the customer with another person unless both the joint accountholders are jointly and severally liable.
Relationship between Banker and Customer
Banks exercise the Right of set off only after serving a notice on the customer informing him that the bank is going to exercise the right of set-off. Automatic right of set off: Depending on the situation, sometimes the set off takes place automatically without the permission from the customer.
In the following events the set off happens automatically i. Conditions while exercising right of Set - Off: It is the right of the customers to direct his banker against which debt when more than one debt is outstanding the payment made by him should be appropriated.
In case no such direction is given, the bank can exercise its right of appropriation and apply it in payment of any debt.
Relationship between Banker and Customer
Section 59,60 and 61 of Indian Contract Act, lays down the rules of appropriation. Application of payment where debt to be discharged is indicated: Application of payment where debt to be discharged is not indicated: Application of payment where neither party appropriates.
Where neither party makes any appropriation the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits.
If the debts are of equal standing, the payment shall be applied in discharge of each proportionally. Unless there is an agreement to the contrary, any payment made by a debtor is applied first towards interest and thereafter towards principal.
The rule was laid down in famous Devayanas Vs. The rule states that each withdrawal in a debit account is considered as a new loan and each deposit as a repayment in that chronological order. Banker's right to charge interest, commission, incidental charges etc.
Banker has an implied right to charge for services rendered and sold to a customer. Bank charges interest on amount advanced, processing charges for the advance, charges for non-utilization of credit facilities sanctioned, charges commission, exchange, incidental charges etc.
Banks charge customers if the balance in deposit account falls below the prescribed amount. Usually the bank informs such charges to the customer by various means. Nomination is expression of wish of a person about transfer of his assets after his death to a named person. Nomination is not a will but it serves the purpose of will. Nomination facility simplifies the procedure for settlement of claims of deceased depositors and locker holders.
In an unfortunate event of the death of a depositor, nomination enables the bank to make payment to the nominee of a deceased depositor, of the amount standing to the credit of the depositor, return the articles left by a deceased person in the bank's safe custody to the nominee without asking for succession certificate or verifying claims of legal heirs. Nomination does not take away the rights of legal heirs on the estate of the deceased. The nominee receives the money from the bank as a trustee of the legal heirs.
In the case of a joint deposit account the nominee's right arises only after the death of all the depositors. Nomination facility is intended for individuals and sole proprietary concerns.
Where the nominee is a minor, the depositor making the nomination appoints any person to receive the amount of deposit in the event of his death during the minority of the nominee.
A person legally empowered to operate a minor's account can file a nomination on behalf of the minor. Nomination can be made in account opening form itself or on a separate form indicating the name and address of the nominee. The account holders can change the nomination any time.
The General Relationship between Banker and Customer | Gr8AmbitionZ
There can be only one Nominee for a deposit account whether held singly or jointly. There can be two nominees for a jointly held locker. Availability of the Nomination facility: Nomination facility is available for all types of bank deposits, safe deposit lockers, and safe custody articles.
This is also applicable to deposits having operating instructions "Either or Survivor". Nomination can be made in favour of one person only. In case of a joint account, nomination is to be made by all depositors jointly. Nomination cannot be made in accounts where deposits are held in a representative capacity e.
Nomination can be made in favour of a minor. However while making the nomination, the nominee has to appoint another person not a minorto receive the amount of the deposit on behalf of the nominee in the event of the death of the depositor during the minority of the nominee. Date of birth of minor be obtained and noted. A nomination will continue to be in force even on renewal of term deposit, unless specifically cancelled or changed.
The amount so credited cannot be remitted outside India. Insurance of Bank Deposits: The authorised capital of the Corporation is Rs. The Corporation protects the interest of depositors and infuses confidence by providing deposit insurance on account of failure of banks. They collect interest on investments, dividends on shares, collect cheques, etc. Bankers act as per the 'Standing instructions' of their customers.
For these services, the banker charges a nominal commission from the customer. The banker, by providing these services acts as an agent and the customer who gives the standing instructions, acts as a principal. Hence, the relation of banker and customer is that of agent and principal as far as these services are concerned.
- Banking & Insurance
- The General Relationship between Banker and Customer
Under a commercial debt, the liability of the debt arises only at the maturity of the debt i. The customer must demand in writing for repayment, only then, will the payment be made to the customer. Banker as a bailee: Bailee is one who posses goods or articles on behalf of the owner called bailor of the goods. According to the Sec. In other words, when customer leaves with the banker some valuables for safe custody in the safe deposit vaults or lockers, the banker performs the functions of the bailee and the relationship between the banker and the customer in such a case is that of a bailee and the bailor.
Banker as a Trustee: A trust is a relation between two persons by virtue of which one of them called trustee holds property vested in him for the benefit of the other called beneficiary. The customer continues to be the owner of the valuables deposited with the banker. The legal position of the banker as a trustee differs from that of a debtor of his customer.
In the event of bank's liquidation, such trust properties held by the banker are not available for the distribution to general creditors of the bank. Proper place and time of demand: The demand by the creditor i. A commercial bank has a large number of branches. The deposits with a bank are not time - barred on the expiry of three years as the case with ordinary debt. The Law of Limitation Act does not apply to a banking debt.
Bank as an executor: Where a customer appoints a banker as his executor and leaves property through a will, the banker has to administer the property according to the terms of the will after the death of such customer.