Saturday, July 24, 2010

Banker-Customer : General Relationship

A banker, in course of his day to day business, enters into different kinds of relationship with his customers and clients. These relationships may be broadly categorized as -
(a) General Relationship and
(b) Special Relationship.
The general relationship between a banker and customer differs depending on the basis of types of dealing they undertake between themselves. Banker-customer is contractual relationship. Generally the following are the major forms of relationships between a banker and his customers:
(1) Debtor-Creditor,
(2) Principal-Agent,
(3) Trustee-Beneficiary,
(4) Bailor-Bailee and
(5) Lessor-Lessee.
(1) Debtor-Creditor: The general relationship between a banker and customer (account holder) is that of a debtor and creditor. If the customer's account shows credit balance, the bank is debtor and customer is creditor. On the other hand, if the account of the customer is overdrawn, the relationship is just the reverse and here the customer is the debtor.
(2) Principal-Agent: All modern banks provide agency services to their customers. When a bankers buys or sells securities on behalf of his customer, he performs an agency function. Similarly, when he collect cheques, bills, interest and dividend etc. or when he pays insurance premium from the customers account, as per his instruction, he acts as an agent.
(3) Trustee-Beneficiary: Many times a banker is in the position of a trustee. A trustee is one who holds property for the benefit of a person or beneficiary. The banker is a trustee when a customer deposits his valuables and securities for safe custody. In this case, the customer continues to be the owner and is entitled to the same goods and valuables as he deposited. The banker can not use the articles kept for safe custody anyway he likes. He can not return equivalent goods in place of the original one. Here the legal position of a banker as a trustee is quite different from that of debtor and creditor. For example, in the event of bank's liquidation, securities and valuables held by the bank as trustee are not available for distribution to the general creditors. Fund, if any, coming to the hands of the bank as a trustee must also be applied for specific purpose as the trust deed indicates.
(4)Bailor-Bailee: When a bank advances money to a borrower, the goods of the borrower may be brought under the control of a bank (pledge). Such goods are called pledged goods. In this case, the relationship between a customer and a banker in respect of the goods under pledge is of a bailor and bailee.
(5) Lessor-Lessee: In case of locker operation, the relationship between the banker and customer is lessor-lessee. Here the banker is Lessor and customer is Lessee.

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