Assignment Prepared by s.a.awa

7/26/2019 Assignment Prepared by s.a.awa

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Introduction

What is a Bank ?

Finance is the life blood of trade, commerce and industry. Now-a-days,banking sector acts as the backbone of modern business. Development ofany country mainly depends upon the banking system.

The term bank is either derived from old Italian word banca or from aFrench word banqueboth mean a Bench or money exchange table. Inolden days, uropean money lenders or money changers used to display!show" coins of different countries in big heaps !#uantity" on benches ortables for the purpose of lending or e$changing.

% bank is a financial institution which deals with deposits and advances andother related services. It receives money from those who want to save inthe form of deposits and it lends money to those who need it.

HISTORY O B!"#I"$ %&'&(O)*&"T

The idea of banks began as long ago as &,'(( )* in )abylon. In thosedays moneylenders made loans to people. In +reece and ome banksmade loans and accepted deposits. They also changed money. !In the

)ible esus famously drove the money changers out of the temple inerusalem".

owever with the collapse of the oman mpire trade slumped and bankstemporarily vanished. owever banking began to revive again in the &/thand &0th centuries in the Italian towns of Florence and +enoa.

In the &1th century a +erman family called the Fuggers from %ugsburgbecame very important bankers.

)anks are 2ust one part of the world of financial institutions, standingalongside investment banks, insurance companies, finance companies,investment managers and other companies that profit from the creation andflow of money. %s financial intermediaries, banks stand between depositorswho supply capital and borrowers who demand capital. +iven how muchcommerce and individual wealth rests on healthy banks, banks are alsoamong the most heavily regulated businesses in the world.


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Background

+overnments have always believed that banking is too important to leave

to bankers. %s a result, there have always been, and always will be, lawsthat regulate the business. 3n the other side of the same coin, bankershave always believed that government is too important to leave to thepoliticians and have never been reluctant to lobby for special legaltreatment.

egulation and special treatment both re#uire a definition of 4the businessof banking5. For many years, this task was left to the 2udges in particularcases, but the &6'6 rewrite of the )anking %ct &676 incorporated a

definition of 4banking business5 in s 7.

The definition was almost immediately e$posed as being inade#uate.egulations authorised by the %ct have added several additional activitieswhich are 4banking business5. In addition, section && of the %ct authorises

%8% to determine that certain provisions of the %ct do not apply to anindividual or a corporation.

9ection : of the %ct prohibits non-corporations from carrying on 4anybanking business5 unless sub2ect to a s && determination. 9ection '

prohibits non-%DI corporations from carrying on 4any banking business5without a special determination.

There is concern about the meaning of 4any5 in these prohibitions. Does itmean 4any part5 of banking business or something else.

To understand the operation of these provisions, it is useful to have a briefreview of both the 2udicial and statutory definitions.

%e+inition o+ a Bank

% bank as ;an establishment for custody of money, which it pays out oncustomer


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The most important %ustralian case is of the State CommissionersSavings Bank of Victoria v Permewan Wright & Co Ltd-./.01 ./ 2(R034. The )ank had collected misappropriated che#ues, and the issue waswhether it was entitled to the protection of the )ills of $change %ct &6(6,s ''. The igh *ourt held that it was, although on the facts it failed tosatisfy the re#uirements of s ''.

3n the 4business of banking5 issue, Issacs !at =:(, =:&" said>

The essential characteristics of the business of banking?may be describedas the collection of money by receiving deposits on loan, repayable whenand as e$pressly or impliedly agreed upon, and the utili@ation of the moneyso collected by lending it again in such sums as are re#uired

This is sometimes referred to as the 4reservoir5 definition. Note that there isno re#uirement for current accounts or for payment facilities. It is alsointeresting to note that +riffith * held that the )ank was not a 4banker5since it did not allow funds to be drawn on by che#ue nor did it collectche#ues.

Permewan Wrightwas approved of and applied inAustralian IndependentDistributors Ltd v Winter-./501 ..6 2(R 007which is discussed below.

The ne$t important case on the sub2ect was Bank of Chettinad v

Commissioner of Income Ta! Co"ombo 8./09: !2 749; a taxationcase Siminton v *ustra"ian Prudentia"'egu"ation *uthorit) 86DD9: 2!2 99


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%ccording to section 7!b" of the )anking egulation %ct, &6=6, bankingmeans the accepting, for the purpose of lending or investment, of depositsof money from the public, repayable on demand or otherwise, andwithdrawable by che#ue, draft, order or otherwise.

To sum up a banker is who

&" Take deposit account/" Take current accounts0" Issue and pay che#ues=" *ollect che#ues crossed and uncrossed for his customers.

Boney lender is not considered as a banker as mere lending does notconstitute banking business. )anker is an institution which borrows money

by accepting deposits from the public for the purpose of lending to thosewho are in need of money.

%&I"ITIO" !"% *&!"I"$ O 2ESTO*&R

% customer is a person who maintains a regular account with the bankwithout taking into consideration the duration and fre#uency of operation ofhis account. To be a customer for any bank the individual should have anaccount with the bank. The individual should deal with the bank in its nature

of regular banking business. e should deal with the bank withoutconsideration of the duration and fre#uency of operation of his account.The relationship between banker and customer is of utmost importance. Ifis generally studied under the following two heads one is generalrelationship and special relationship.

The term ;*ustomer; has not yet been statutorily defined. +enerally, theterm customer means a person who has an account with bank. )ankinge$perts and legal 2udgments in the past, however, used to #ualify thisstatement by laying emphasis on the period for which such account hadactually been maintained with the bank.9ir ohn 8aget was one of those e$perts from the past. %ccording to him,;to constitute a customer, there must be some recogni@able course of habitof dealing in the nature of regular banking business.;This definition from 9ir -ohn 8aget lays emphasis on the duration of thedealings between the bank and the customer. %ccording to his view,


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a person does not become a customer of the banker on theopening of an account he must have been accustomed to deal with thebanker before he is designated as a customer.The emphasis on duration of the bank account is nowdiscarded. %ccording to Dr. art, ;a customer is one whohas an account with banker or for whom a bankerhabitually undertakes to act as such.;The above view point was confirmed by the Jeralaigh *ourt in the case of *entral )ank of India Atd., )ombay G. +opinathanNair and other. The lordship observed>;)roadly speaking, a customer is a person who has thehabit of resorting to the same place or person to dobusiness. 9o far as the banking transactions are concerned heis a person whose money has been accepted on the footing that

the banker honor his che#ues up to the amount standing to hiscredit, irrespective of this connection being of short or longstanding;.

Thus, in order to constitute customer, a person should satisfy the followingconditions>a" e should have an account with bankb" and the dealings should be of banking nature.

%n individual or business that purchases the goods or services producedby a business. The customer is the end goal of businesses, since it is thecustomer who pays for supply and creates demand. )usinesseswill oftencompete through advertisements or sales in order to attract a largercustomer base.

The term customer is not defined by law. 3rdinarily, a person whohas an account in a bank is called a customer.

%cc to Dr. art, a customer is one who has an account with a banker or forwhom a banker habitually undertakes to act as such.

Thus to constitute a customer, the following essential re#uisites must befulfilled>

&" e must have some sort of an account./" ven a single transaction constitutes a customer.0" The dealing must be of a banking nature.
http://www.investopedia.com/terms/b/business.asphttp://www.investopedia.com/terms/b/business.asp


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% customer need not be a person. % firm, 2oint stock company, a society orany separate legal entity may be a customer. $planation to section =7- ofthe ) %ct clarifies that a customer includes a +overnment department anda corporation incorporated by or under any law.

Banker customer

&. )anker *ustomer There is no statutory definition of the termObankerM and OcustomerM )anker The business of a banker in ordinaryconsists in receiving money from or an account of a customer andrepaying the same on demand.

/. The Negotiable Instrument %ct defines a banker as any person actingas a banker. The )anking egulation %ct, &6=6 defines ObankingcompanyM as a Ocompany which transact the business of banking inIndia. OThe term bankingM has been defined as OacceptingM for thepurpose of lending or investment. of deposit of money from the publicrepayable on demand or withdraw able by che#ue, draft or order.

0. % customer is a person who has some sort of account, either depositor current account, with the banker.

=. Aegal relationship between banker and customerP The relationshipbetween a banker and his customer is essentially contractual likeDebtor !banker" and creditor !customer".P This relationship issometimes reversed. This happens when the banker lends money tothe customer.P The relationship also partakes many aspects of agentand principal.

7. 9pecial features or legal relationshipP 3bligation to honour che#ues.P3bligation to keep proper record of transactions.P 3bligation to abideby the e$press instruction of the customer.P 3bligation not to disclosethe state of his customerMs account or affairs.P ight of general lien.Pight to charge incidental charges and interest on money lent.P ightto set-off.P ight of appropriation.

1. hen may a banker dishonor a customerMs che#ueEP here thebanker does not have sufficient funds to the credit of the customer.P


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here the funds to the credit of the customer are not applicable tothe payment of the che#ue. !when the money held in trust"P herethe che#ue is ambiguous or doubtful.P here the che#ue is mutilated!imperfect".P here the che#ue is irregular or materially altered.Phere the che#ue is not duly presented.P here the che#ue is postdated.P here the che#ue has become stale. !si$ months from thedate of issue".P here the che#ue is presented at a other branch.Phere an account is in 2oint names of a few persons, but they havenot all signed the che#ue.P here the che#ue is for an amount ine$cess of the balance.

:. hen must a banker dishonor a cuctomerMs che#ueEP hen thecustomer become insolvent.P hen the customer countermandspayment !order the banker not to honour the che#ue."P hen the

banker receive notice of the customerMs death. )ut he pays theche#ue before he receive notice, the payment is valid.P hen thebanker receive notice of the customerMs insanity !madness, lunacy".Phen banker receive the legal notice about customer or dealing withmoney from some other sources.P hen the customer gives notice tothe banker to close the account.P hen the customer gives notice ofassignment of the credit balance of his account.P hen the bankersuspects, that the title of the person presenting the che#ue isdefective.P hen the holder gives a notice of loss the che#ue to thebanker

'. 8rotection of 8aying )ankerP *he#ues payable to bearerP *rossedche#uesP 8ayment of che#ue crossed generally.P 8ayment of che#uecrossed specially.P 8ayment of crossed che#ue in due course.P8ayment of crossed che#ue out of due course.

6. 8rotection of collecting bankerP *ollecting banker as an agent.P*rossed che#ues.P 3pen che#ues.P *ollecting banker as a holder indue course.

"!TER& O R&(!TIO"SHI) B&TW&&" B!"#&R 2ESTO*&R

)efore we take up the relationship that e$ists between a banker and his

customer, let us understand the definitions of the terms banker and

customer.


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%e+inition o+ BankingF

%ccording to the section 0 of the Negotiable Instrument %ct &''&,

;)anker includes persons, or a corporation or a company acting asbankers.;

%ccording to the section 7!(" of the )anking *ompanies %ct &66&,

;)ank *ompany; means any company serves transactions !)anking

)usiness in )angladesh" including new bank and speciali@ed banks.

%ccording to the section 7!8" of the )anking *ompanies %ct &66&,

;)anking )usiness; means accepting, in order to lend or invest, of

deposits of money from the public which will be paid on demand or

otherwise and will be withdrawal by che#ue, draft, order or otherwise.

The salient features of this definition are as follows>% banking company must accept deposit and lend or invest the same.

If the purpose of accepting deposit is not to lend or invest, it does not

constitute banking business. In other words, acceptance of deposit

with a view to lending or investing the same is the business of

banking.

The definition specifies the time and mode of withdrawal of deposits.

The deposited money must be repayable to the depositor on demand

made by the latter or according to the agreement reached between

the two parties. The most important point here to be noted that the

banker does not refund the money on his own accord, even if the

period for which it was deposited e$pires. The depositor must make a

demand and the withdrawal should be effected through che#ue, draft,

and order or otherwise.

It is, thus, clear that the underlying principle of the business of

banking is that the resources mobili@ed through the acceptance of

deposits must constitute the main stream of funds which are to be


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utili@ed for lending or investment purposes. % bank is, thus, an

intermediary and deals with the money belonging to the public.

R&(!TIO"SHI) B&TW&&" B!"#&R 2ESTO*&R

The relationship between a banker and customer depends upon the type of

service rendered by the banker. The primary relationship between a banker

and customer is legal based on contract as per *ontract %ct, &':/.

owever, the most valued relationship for the banking business is the

behavioral relationship.

(&$!( R&(!TIO"SHI)F

I" Debtor and *reditorII" 8rincipal %gentIII" 8ledgor 8ledgeeIG" Bortgagor BortgageeG1 (essor Aessee andGI" Trustee )eneficiary.

'e"ation of a debtor and a creditor

The general relationship between banker and a customer is that of a debtorand a creditor i.e. borrower and lender. In %oley #$ &ill, 9ir ohn 8agetremarks, the relation of a banker and a customer is primarily that of debtorand creditor, the respective positions being determined by the e$isting stateof account. Instead of the money being set apart in a safe room, it isreplaced by the debt due from the banker. The money deposited with himbecomes his property, and is absolutely, at his disposal, and, save asregards the following of the trust funds into his hands, the receipt of moneyby a banker from or on account of his customer constitutes him merely the

debtor of the customer with super added obligation to honour his customersche#ues drawn upon his balance, in so far the same is sufficient andavailable.

In Shanthi Prasad -ain v Director of /nforcement! %oreign '(change)egulation, the 9* held that the banker and customer relationship in


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respect of the money deposited in the account of a customer with the bankis that of a debtor and a creditor.

3n the opening of an account a banker assumes the position of a debtor.The money deposited by the customer with the bank is in legal terms lentby the customer to the banker who males use of the same according to hisdiscretion. The creditor has the right to demand back his money from thebanker, and the banker is under an obligation to repay the debt as andwhen he is re#uired to do so.

% depositor remains a creditor of his banker so long as his account carriesa credit balance. )ut he does not get any charge over the assets of hisdebtorHbanker and remains an unsecured creditor of the banker. 9ince theintroduction of deposit insurance in India in &61/ the element of risk of the

depositor is minimi@ed as Deposit Insurance and *redit +uarantee*orporation undertakes to insure the deposits upto a specified amount.

)ankers relation with the customer is reversed as soon as the customersaccount is overdrawn. )anker becomes creditor of the customer who hastaken a loan from the banker and continues in that capacity till the loan isrepaid. %s the loans and advances granted by a banker are usually securedby the tangible assets of the borrower, the baker becomes a securedcreditor of his customer.

Various "ega" re"ationshi%s of banker and customer

/" Agent and Principal*9ec.&'/of The Indian *ontract %ct, &':/ definesan agentas a person employed to do any act for another or to representanother in dealings with third persons. The person for whom such act isdone or who is so represented is called the 8rincipal.

3ne of the important relationships between a banker and customer is thatof an agent and principal. The banker performs various services of thecustomer, where he acts as the agent.

)uying and selling securities of customer

*ollection of che#ues, bills of e$change, promissory notes on behalf ofcustomer

%cting a trustee, e$ecutor or representative of a customer


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8ayment of insurance premium, telephone bills etc.

&" Trustee and beneficiar)(section 0 of the Trusts %ct defines a

trustee as one to whom property is entrusted to be administered for thebenefit of another called the beneficiary. % banker becomes a trustee underspecial circumstances. hen a customer deposits securities or othervaluables with the banker for safe custody, the banker acts as trustee ofcustomer.

/" Bai"ee and bai"or(during certain circumstances banker becomesbailee. hen he receives gold ornaments and important documents forsafe custody he takes charge of it as bailee and not trustee or agent. e

cannot make use of them as he is bound to return the identical articles ondemand.

0" Pawnee and %awner(pawn is a sort of bailment in which thegoods are delivered to another as a pawn, to be a security for moneyborrowed. Thus a banker acts as a pawnee where a customer delivers hegoods to him to be kept as security till the debt is discharged. The bankercan retain the goods pledged till the debt is paid.

=" Mortgagee and mortgagor* the relation between a banker as

mortgagee and his customer as mortgagor arises when the latter e$ecutesa mortgage deed in respect of his immovable property in favour of the bankor deposits the title deeds of his property with the bank to create ane#uitable mortgage as security for an advance.

71 Lessee and "essor*when a customer hires a locker in the bankssafe deposit vault, the bank undertakes to take necessary precaution forthe safety of the articles in the locker. The relation between the parties isthat of a lessor and lessee.

11 0uarantor and guarantee(abank as guarantor gives guaranteeto its customer by issuing a letter of credit. It is a kind of credit facility to itscustomer to facilitate international trade. % bank guarantee contains anundertaking to pay the amount without any demur on mere demand of theprincipal amount on the ground for non-performance or breach of contract.


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:" .iduciar) re"ationshi%*every relation of trust and confidence is afiduciary relation. % banker who receives a customers money is under aduty not to part with it which is inconsistent with the customers fiduciarycharacter and duty. In +fficial Assignee #$ )a"aram Aiyar, it was held thatwhere banks old money for a specific purpose of sending it somebody themoney is impressed with trust.

S@ecial relationshi@ beteen banker customer

)y opening an account with the banker, there will be some rights conferredand obligations imposed to the banker as well as the customer. Theserights and duties are reciprocal i.e. the bankers duties are the customersrights and the bankers rights are the customers duties. These rights andobligations are called the special features of relationship between banker

and the customer.

The special relationship between banker and customer can be presentedas under>

%ETI&S !"% OB(I$!TIO"S O B!"#&RF

The primary relationship between banker and his customer is that of a

debtor and a creditor. This relationship imposes the following special

obligations on the banker>

%" 3)AI+%TI3N T3 3N3 *QC> The deposits accepted by a

banker are his liabilities repayable on demand or otherwise. The banker is,

therefore, under a statutory obligation to honor his customer

; The drawee of a che#ue having sufficient funds of the drawer in his

hands, properly applicable to the payment of such che#ue, must pay the

che#ue, when duly re#uired so to do and in default of such payment must

compensate the drawer for any loss or damage caused by such default.;

Thus, a banker is bound to honor his customer
http://etcinfo.blogspot.com/2011/02/cheque-book-issuance-delivery-of-cheque.htmlhttp://etcinfo.blogspot.com/2011/02/cheque-book-issuance-delivery-of-cheque.html


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&" There must be sufficient funds of the drawer in the hands of the

drawee. )y sufficient funds is meant that funds at least e#ual to the amount

of the che#ue presented for payment. %ny over draft arrangement or facility

granted in favor of the customer needs to be taken into consideration and

payment to be made within the limit./" The funds must properly be applicable to the payment of the che#ue.

% customer might have several bank accounts in his various capacities. If

some funds are earmarked by the customer for some specific purposes,

the said funds are not available for honoring his che#ue. In addition, it is to

be noted here that in case of a few special types of accounts can not be

drawn upon in the personal capacity of a trustee, e$ecutor etc., funds are

not available for honoring the customer

I" The monetary loss suffered by the customer and

II" Theloss of credit or reputation in the marker.

It is, therefore, to be noted that the banker is liable to compensate the

drawer not only for the actual monetary loss suffered by him but also for

the in2ury to or loss of his reputation, as a result dishonor of a che#ue

)" 3)AI+%TI3N T3 B%INT%IN 9**R 3F%**3CNT9>
http://etcinfo.blogspot.com/2009/05/opening-procedure-of-various-types-of.htmlhttp://etcinfo.blogspot.com/2009/05/opening-procedure-of-various-types-of.html


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Jeeping secrecy means that the state of affairs of a customer

I" hen the law re#uires such disclosure to be made and

II" hen the practices and usages amongst the bankers permit such

disclosure.

In addition, the banker has obligations to do the following>

I" To credit the deposited money to the customer


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The customer has the following rights based on his relationship with the

banker>

a" To deposit money in his account on time

b" To demand repayment by issuing che#ue or written orderproperly in proper time and place

c" To get statement of account in agreed manner

d" To stop payment of his che#ue

e" To give standing instruction

f" To claim interest on his deposit balance in the interest bearing

account

g" To claim damages for any loss or damage caused due to

wrongful dishonor of his che#ue by bank

h" To claim money when the payment is not made in due course

i" To have secrecy of his account etc.

2ESTO*&RJS OB(I$!TIO"F

% customer has the following duties and obligations to perform>

I" e must deposit amount properly and in time

II" e must demand payment issuing che#ue or written order

properly and he must present the che#ue for payment within

banking hour

III" e must pay the bank charges, interest and commission

payableIG" e must abide by the laws

G" e must keep his che#ue book in his safe custody

GI" e must inform the bank on time for any loss of che#ue leaf or

che#ue book


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R&(!TIO"SHI) T&R*I"!TIO" O B!"#&RC2ESTO*&RII"

There are a number of valid reasons which terminates the banker

-customer relationship. % few of them is stated below>I" Notice given to each other with view to closing the accountII" Cpon the death of a customerIII" hen a customer is ad2udicated as insolvent by a court of lawIG" hen customer ceases to enter into a contract.

0enera" ob"igations of banker towards customer

+bligation to honour cheques- banker accepts the deposits from thecustomer with an obligation to repay it to him on demand or otherwise. Thebanker is therefore under a statutory obligation to honour his customersche#ues because, it is recogni@ed under section 0& of the NI %ct, &''&-

he drawee of a cheque ha#ing sufficient funds of the drawer in his handsproperly applicable to the payment of such cheque must pay the chequewhen duly required so to do! and! in default of such payment! must

compensate the drawer for any loss or damage caused by such default$

Thus the banker is bound to honour his customers che#ues provided thefollowing conditions are fulfilled-

!a" 9ufficient balance in customers account!b" 8resentation of che#ues within working hours of business!c" 8resentation of che#ues within reasonable time after ostensibledate of its issue!d" *he#ues should be presented at the branch where account is kept

!e" Fulfilment of re#uirements of law

+bligation to maintain secrecy and disclosure of information required bylaw- the banker is under an obligation to take utmost care in keepingsecrecy about the accounts of the customers since it may affect his


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reputation, credit-worthiness and business. It was firmly laid down inTournier v 1ationa" Provincia" and #nion Bank of /ng"and Ltd


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accounts and pay the resultant balance. In &alesowen Presscook and*ssemb"ies Ltd v Westminister Bank Ltd;it was held that a banker hasthe right to combine two accounts and to set off unless he has made someagreement e$press or implied to the contrary.

Bankers right for appropriation of payment- when a debtor owes two ormore debts to a creditor and he pays some amount which is not sufficientto meet any debt to the creditor appropriation is done. It applies to a bankerif the customer has more than one deposit or more than one loan account.

In Deva)nes v 1ob"e, famously known as ,laytons case, a principle waslaid down as to when the customer has current account and deposits andwithdraws money fre#uently the first item on debit side will be dischargedby the first item on credit side. The credit entries in the account ad2ust or

set off the debit entries in chronological order.

Bankers right to claim incidental charges- the banker may claim incidentalcharges on unremunerative accounts such as service charges, processingcharges, ledger folio charges, appraisal charges, penal charges and so on.

Bankers right to charge compound charges- a banker has a specialprivilege to charge compound interest. In S)ndicate Bank v West Benga"Cement Ltd;the adding of unpaid interest due to the principal amount isrecogni@ed. owever, the 9* abolished this in case of agricultural loans in

the Bank of India case.

4< What are the obligations o+ a banker?

&. Obligation to honour cheKues- the banker is under a statutoryobligation to honour his customers che#ues in the ordinary course of

business. If he wrongfully dishonors the che#ue, then he is liable to thecustomer for damages.

Thus the banker is bound to honour the customers che#ue provided thefollowing conditions are fulfilled-


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!a" 9ufficient funds- there must be sufficient funds of the drawer in thehands of the drawee. % banker should be given sufficient time torelease the amount of the che#ue sent for collection before the saidamount can be drawn upon by the customer. The banker candishonor the che#ues if there are insufficient funds.

!b" Funds must be properly applicable- a customer might be havingseveral bank accounts in his various capacities. )ut is essential thatthe account on which a che#ue is drawn must have sufficient funds. Ifsome funds are earmarked by the customer for some specificpurpose, they are not available for honouring the che#ues. )ut wherethe customer has overdraft facility the banker has the obligation tohonour the che#ue upto the amount of overdraft sanctioned.

!c" The banker must be duly re#uired to pay- the banker is bound tohonour the che#ue only when hi is duly re#uired to pay. The che#ue,complete and in order, must be presented before the banker at theproper time.

/. Obligation to maintain secrecy o+ accounts-The customersaccount details are recorded in the books of the banker and the truestate of his financial dealings are available with the banker. If any ofthese facts are made known to others, the customers reputation mightsuffer and he might incur losses also. The banker is therefore under an

obligation to take utmost care in keeping secrecy of the details of thecustomer.

owever, this rule has e$ceptions!mention briefly"

0< Obligation to kee@ a @ro@er record o+ transactionC the bankermust keep a proper and accurate record of all the transactions of thecustomer. 9ometimes, he may commit some wrong.

What are the circumstances under hich a disclosure by banker is

Lusti+ied? OR Bankers duty o+ secrecy is not absolute< &x@lain

)uying and selling securities on his behalf,

*ollection of che#ues, dividends, bills or promissory notes on his

behalf, and

%cting as a trustee, attorney, e$ecutor, correspondent or

representative of a customer.


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)anker as an agent performs many other functions such as payment of

insurance premium, electricity and gas bills, handling ta$ problems, etc.

'. elationship of %dvisor and *lient

hen a customer invests in securities, the banker acts as an advisor. The

advice can be given officially or unofficially. hile giving advice the banker

has to take ma$imum care and caution. ere, the banker is an %dvisor, and

the customer is a *lient.

6. 3ther elationships

3ther miscellaneous banker-customer relationships are as follows>

Obligation to honour cheKues > %s long as there is sufficient

balance in the account of the customer, the banker must honour allhis che#ues. The che#ues must be complete and in proper order.They must be presented within si$ months from the date of issue.owever, the banker can refuse to honour the che#ues only in certaincases.

Secrecy o+ customerJs account > hen a customer opens an

account in a bank, the banker must not give information about the

customer % banker has a right to

charge a commission, interest or other charges for the variousservices given by him to the customer. For e.g. an overdraft facility.

(a o+ limitation on bank de@osits> Cnder the law of limitation,

generally, a customer gives up the right to recover the amount due ata banker if he has not operated his account since last &( years.

9o, these were some important banker-customer relationships.

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Assignment Prepared by s.a.awa

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