BANKER- CUSTOMER RELATIONSHIP

A PRESENTATION BY

B.J.VEDWISH U ALL A HAPPY LEARNING

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BANKING-SEC.5(b)OF BRA1949• Accepting of deposits• Lending or investing(Purpose)• From Public• Payable on demand or therwise• Withdrawal of deposits by cheque,

draft etc.

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CUSTOMER

• Maintaining any type of a/c• Submission of a/c opening form

fulfilling KYC requirements• Customer of specific branch only but

with CBS advantages• Not defined till 1986. Only mention in

Sec 131 of N.I.Act. Now defined in Consumer Protection Act 1986.

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RELATIONSHIP

TRANSACTION BANKER’S RELATION *DEPOSITS DEBTOR

*LOANS/ADV. CREDITOR*BILLS - COLLECTION AGENT*BP/BD HOLDER FOR

VALUE*LOCKER LESSOR *ARTICLES-SAFE CUS. BAILEE

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CONTINUED

*INVESTIGATION REFEREE*EXECUTOR/TRUSTEE TRUSTEES*CUSTODIAL SERVICES

CUSTODIAN

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TERMINATION OF RELATIONSHIP• Notice of Death/insolvency of

customer or liquidation of company/lunacy

• Closure of a/c by customer (Voluntary)

• Closure of a/c by bank (Due Notice)

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DUTIES OF BANKER(1) To honour cheques provided 1. Cheque properly drawn 2. presented within business hours 3. Regular/proper endorsement 4. Sufficient balance in a/c/Limit 5. Relation is not terminated: a. death b. insolvent/lunatic 6. Payment is not stopped by drawer 7. Garnishee/income tax order

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DISHONOUR OF CHEQUES

• Funds insufficient/exceeds arrangement• Stop Payment by customer or by

attachment order or court order/ withdrawal stopped owing to death or lunacy or insolvency of a/c holder/ Cheque Altered & no authentication, Cheque post dated, un-dated, out dated, Effects not cleared-Present again, A/c closed, Refer to drawer ect.

• Instrument specially crossed to -----------• Earmarked balance not sufficient

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(2) DUTY TO MAINTAIN SECRECY

• Moral and legal duty• Reputation of customer• Applicable to transactions & security• Continues even after death/closing of a/c• Applicable for information obtained from

outside• Divulge customary informationSubject to exceptions to duty of secrecy.

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CONTINUED

• Information to be furnished provided: * Request is in writing under

relevant section and act * Request is by authorised person * Furnish only asked information * Only specific(not general) infomation * Diff in a/c, name no info. to be furnished * Fact to be advised to a/c holder

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(3)DUTY TO RENDER ACCOUNTS FOR SERVICES

To provide passbook or statement of a/c duly completed in all respects

(4)To collect cheques, drafts etc.(5) To give reasonable notice before

a/c is closed.

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LIABILITY IN CASE OF BREACH OF DUTY OF SECRECY • LIABLE TO CUSTOMER • LOSS OF MONEY AND REPUTATION• COURT TO CONSIDER ACTUAL LOSS

OF MONEY AND DAMAGE OF REPUTATION

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RIGHTS OF A BANKER

• PARTICULAR LIEN: I.e. TAILOR’S LIEN• GENERAL LIEN: LEGAL POSSESSION

UNTIL THE WHOLE OF THE DEBT IS PAID.

• (1)BANKERS LIEN IS GENERAL LIEN KNOWN AS “IMPLIED PLEDGE”

• RIGHT OF SALE IS ALSO AVAILABLE TO BANK WITH REASONABLE NOTICE.

• AGAINST TIME ‘BARRED DEBTS’ ALSO

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BANKERS RIGHT OF LIEN

• GEN. LIEN ON ALL GOODS & SECURITIES• GOODS & SECURITIES IN THE NAME OF

BORROWER ONLY• AVAILABLE AFTER REPAYMENT OF LOAN

ALSO• CHEQUES FOR COLLECTION • CREDIT BAL. SUBJECT TO RIGHT OF SET-

OFF AND NOT LIENSubject to exceptions to Banker’s Right of

Lien

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(2)BANK’S RIGHT OF SET-OFF• COMBINE SEVERAL A/Cs OF

BORROWER• LETTER OF SET-OFF TO BE OBTAINED• REASONABLE NOTICE TO CUSTOMER• CUSTOMER HAS NO

CORRESPONDING RIGHT OF SET-OFF TO COMBINE HIS A/C’s FOR PURPOSE OF WITHDRAWAL

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SET-OFF IS APPLICABLE IF

• A/Cs ARE IN SAME NAME AND RIGHT • BELONGING TO ONE PERSON i.e. SB A/C

AND PROPRIETORSHIP FIRM’S ACCOUNT• PARTNERS INDIVIDUAL A/C(CREDIT)

AGAINST FIRMS DEBT AS LIABILITY OF PARTNERS IS JOINT & SEVERAL

• INDIVIDUALS A/C CREDIT BAL. AGAINST DEBIT BALANCE IN JOINT A/CS

• ALSO FORTWO A/CS AT DIFFERENT BRANCHES

• EVEN AGAINST TIME BARRED DEBTS• SET-OFF BEFORE GARNISHEE/IT ORDER

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RIGHT OF SET-OFF IS NOT APPLICABLE IF• FUTURE & CONTIGENT DEBTS• DEBIT BAL. IN PERSONAL A/CS

AGAINST CREDIT BAL. IN JOINT A/C, CAPACITY AS TRUSTEE, AGENT, GUARDIAN, EXECUTOR ETC

• NO CLEAR CREDIT BALANCE

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(3)RIGHT OF APPROPRIATION (CLAYTON’S RULE) &. 59 TO 61 OF IND. CONTRACT ACT 1872• DEBTOR’S INSTRUCTIONS TOWARDS

SPECIFIC DEBT• IN ABSENCE OF DEBTOR’S INSTRUCTIONS,

BANK TO APPLY TOWARDS ANY LAWFUL DEBTS (EVEN TIME-BARRED DEBTS)

• IN ABSENCE OF BOTH AS ABOVE ,TO BE APPLIED IN ORDER OF TIME OF CREATION OF DEBT WHETHER TIME-BARRED OR NOT. IF DEBTS ARE OF EQUAL STANDING, PAYMENT TO BE APPLIED PROPORTIONATELY>

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BANKER’S RIGHTS

(4)CHARGE INTEREST,COMMISSION, EXCHANGE, INCIDENTAL CHARGES FOR SERVICES RENDERED AND SOLD TO CUSTOMERS

CUSTOMER’S DUTIES

• A/c to be conducted satisfactorily. Maintain Min. Reqd. Bal.

• Cheques to be drawn properly so as not to facilitate forgery or fraud.

• To give full & proper instructions while countermanding a cheque.

• To make demand for payment• To pay charges for services rendered

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THANK YOU