Banker: According to Section 3 of the Negotiable Instruments Act the term banker includes any person acting as a banker.

Customer: Though customer has not been defined under any Banking law in India, but in certain legal cases courts have defined Customer. As per that a customer is a person who has some kind of account, such as deposit or current with a bank or has some similar relation with a bank. Customers can be categorized as under (a) (b) (c) (d) (e) Existing customers Former Customers Frequently availing banking facilities but not having account One time Visitor Potential customers

Technically (c) & (d) types are not the customer of a bank. In such case though bank is liable for the transaction but legal relationship is not established. (e) type will be treated as customer in case, duly filled account opening form is accepted by the bank for opening account.

Legal Requirements to be qualified as Customer: Customer should be a major/Customer & is of sound mind He should not be debarred under any law Offer and acceptance Transaction between two parties Should have an account Dealing of banking nature only A person, a company, a society or any legal entity

RELATIONSHIP: The relationship between a banker and a customer depends on the transaction taking place between them. In other words it would depend upon product/service provided by bank to its customers. The primary legal relationship between a banker and customer is based on contract as per Contract Act, 1872.

However, depending upon the transaction other laws may come into effect. Legal relationship between Banker & Customer is normally of two types:

In terms of of Banking Regulation Act : Accepting of deposits for the purposes of lending. Thus the relationships arising out of these two main activities are known as General Relationship.

1. 2.

Debtor Creditor Creditor Debtor

In terms of in Sec.6 of Banking Regulation Act: Relationship arising out of the activities mentioned in Sec.6 of the act is termed as special relationship. The relationship developed between a banker and customer involves some duties on the part of both:

DUTIES AND OBLIGATIONS OF BANKER: Duties of a banker: Duty to maintain secrecy/confidentiality. Duty to honour cheques/commitment made by the customer Duty to collect cheque/bills on customers behalf. Duty to provide related services.

Duty to act as per the directions or act as a man of ordinary prudence. Duty to submit periodical statements/information Duty to protect the interest of customer Duty to pass on any benefits derived out of transaction

Circumstances under which banker can disclose information of customer's account: Under compulsion of law. Under banking practices. For protecting national interest. For protecting banks own interest Under express or implied consent of the customer

Rights of a banker: Right of General Lien Right of Set-Off Right of Appropriation Right to Charge Interest, Commission, Incidental Charges

DUTIES AND OBLIGATIONS OF CUSTOMER: RIGHTS OF CUSTOMER: To deposit money in his account

To demand repayment by issuing cheque or written order properly in proper time and place To get statement of account in agreed manner To stop payment of his cheque To give standing instruction

To claim interest on his deposit balance in the interest bearing account To claim damages for any loss or damage caused due to wrongful dishonor of his cheque by bank To claim money when the payment is not made in due course To have secrecy of his account etc.

Duties of Customer To pay remuneration to the agent

Not to prevent his agent from performing the duties/ acts assigned to him under the contract and for which remuneration is payable. Indemnify for the cost incurred by agent. Do the transaction properly and in time demand payment in written within banking hour Abide by the laws keep his cheque book/ Instruments safely Must inform the bank on time for any loss of cheque leaf etc.

Termination of relationship between a banker and a customer: Death, insolvency, lunacy of the customer. Closure of the account by customer Liquidation of the company Closure of the account by the bank after giving due notice. Completion of the transaction.