Definition of Customer in Banking
A customer is a person who has a bank account in his name, and for whom a tile banker undertakes to provide the facilities or services as a banker. A banking customer is defined as:
- A person or entity that maintains an account and/or has business relationships with the bank.
- One on whose behalf the account is maintained.
- The beneficiary of the transaction carried professional intermediaries.
- Person or entity connected with a financial transaction that can pose significant reputational or other risks to the bank
A customer is a person who has an account, either a deposit or a current account, with the banker.
The Obligation of Customers to the Bank
A customer is a person who has an account, either a deposit or a current account, with the banker. The obligation of customers to the bank are given below.
- Present the cheque and other negotiable instruments during the bank’s business hours.
- Notify the bank in case of any disagreement in the bank statement
- Submit photographs to the bank whenever needed
- The customer should present the instrument of credit within the due time from the date of issue.
- A customer should fill out the cheque with utmost care.
- In case of theft or loss of a checkbook, it is the duty of the customer to inform their bank.
- If a customer finds any forgery in the cheque amount, they must immediately inform their bank.
- To provide proper information in KYC Forms
- Repayments of dues on time
- Read the MITC, Most Important Terms and Conditions.
9 Relationship Between Bankers and Customers
The relationship between banker and customer is mainly that of a debtor and creditor. However, they also share other relationships—some of the important relationships they share are depicted below.
Debtor and Creditor.
When a customer opens an account with a bank, and if the account has a credit balance, the relationship is that of the debtor (banker/bank) and creditor (customer).
In the case of savings / fixed deposit / current account (with credit balance), the banker is the debtor, and the customer is the creditor.
In loan/advance accounts, the banker is the creditor, and the customer is the debtor because the customer owes money to the banker.
Pledger and Pledgee
The relationship between customer and banker can be that of Pledger and Pledgee. This happens when the customer pledges (promises) certain assets or security with the bank to get a loan. In this case, the customer becomes the Pledger, and the bank becomes the Pledgee.
Licensor and Licensee
The relationship between banker and customer can be that of a Licensor and Licensee. This happens when the banker gives a sale deposit locker to the customer. So, the banker will become the Licensor, and the customer will become the Licensee.
Bailor and Bailee
The relationship between banker and customer can be that of Bailor and Bailee. Bailor is the party that delivers property to another. Bailee is the party to whom the property is delivered.
When a customer gives a sealed box to the bank for safekeeping, the customer becomes the bailor, and the bank becomes the bailee.
Hypothecator and Hypothecate
The relationship between customer and banker can be that of a Hypothecator and Hypothecate. This happens when the customer hypothecates (pledges) certain movable or non-movable property or assets with the banker to get a loan. In this case, the customer became the Hypothecator, and the Banker became the Hypothecate.
Trustee and Beneficiary
A trustee holds property for the beneficiary, and the profit earned from this property belongs to the beneficiary. If the customer deposits securities or valuables with the banker for safe custody, the banker becomes his customer’s trustee. The customer is the beneficiary, so the ownership remains with the customer.
Agent and Principal
The banker acts as an agent of the customer (principal) by providing the following agency services: Buying and selling securities on his behalf.
Collection of cheques, dividends, bills, or promissory notes on his behalf, and
Acting as a trustee, attorney, executor, correspondent, or customer representative.
A banker, as an agent, performs many other functions, such as paying insurance premiums, electricity, and gas bills, handling tax problems, etc.
Advisor and Client
When a customer invests in securities, the banker acts as an advisor. The advice can be given officially or unofficially. While giving advice, the banker has to take maximum care and caution. Here, the banker is an Advisor, and the customer is a client.
Secrecy of customer’s account
When a customer opens an account in a bank, the banker must not give information about the customer’s account to others.
Other Relationships between Bankers and a Customer
Other miscellaneous banker-customer relationships are as follows:
- Obligation to honor cheques: As long as there is sufficient balance in the customer’s account, the banker must honor all his cheques.
- Banker’s right to claim incidental charges: A banker has a right to charge a commission, interest, or other charges for the various services given to the customer—for example, an overdraft facility.
- Law of limitation on bank deposits: Under the law of limitation, generally, a customer gives up the right to recover the amount due at a banker if he has not operated his account for the last 10 years.
These were some important banker-customer relationships.
