Meaning and Definition of Banker:
The term ‘banker’ refers to a person or company carrying on the business of receiving moneys and collecting drafts, for customers subject to the obligation of honouring cheques drawn upon them from time to time by the customers to the extent of the amounts available on their current accounts.
According to G. Crowther, “A banker is a dealer in debt, his own and other people.”
Meaning and Definition of a Customer:
‘Customer’ means of a bank is not defined by law. In the ordinary language, a person who has an account in a bank is considered a customer. The term customer also presents some difficulty in the matter of definition. the legal definition on the matter throw some light on the meaning of the term.
According to Sir John Paget,-“to constitute a customer, there must be some recognisable course or habits of dealing with nature of regular banking business… It has been thought difficult to reconcile the idea of a single transaction with that of a customer that the word predicate, even grammatically, some minimum of custom and antithetic to an isolated act.” According to this view in order to constitute a customer of a bank two conditions are to be fulfilled.
(a) He must have an account with the bank – i.e. savings account, current account, or fixed deposit account.
(b) The transactions between the banker and the customer should be of banking nature. be in the form of regular banking nature. i.e., a person who approaches the bank for operating safe deposit Lockers for purchasing Travellers cheque is not a customer of the banks in search transactions do not come under the orbit of Banking transactions.
(c) frequency of transactions is not quite necessary though anticipated.
The Banker-Customer Relationship
The relationship between bankers and customers arises out of contract entered in between them. the contract is created by mutual consent. the contractual relationship between banker and customer is regulated by the rules contained in the negotiate Negotiable Instrument Act, 1881 and Contract Act, 1872. The relationship starts right from the moment and account is opened and it comes to an end immediately on closure of the account. The relationship is of two types:
(a) General Relationship
(b) Special Relationship
(a)General Relationship:
the general relationship between banker and customer can be classified into two types:
1. Primary Relationship
The true relationship between a Banker and his customer is that of a debtor and creditor. Sir John Paget says– “The relationship of banker and customer is primarily that of a debtor and creditor, the respective position being determined by the existing state of the account. Instead of money being set apart in the safe room, it is replaced by a debt from the banker. The money deposited with him becomes his property and is absolutely at his disposal.” as long as the customer’s account shows a credit balance the banker would be a debtor and in case the customer’s account show a debit balance, the banker would be a creditor.
although the banker is a debtor and the customer is a creditor, it is not necessary for the debtor to go to the creditor to pay the amount. This is normally expected in the case of commercial transactions where in there are two parties. One a debtor and the other one a creditor.
The demand by the creditor must be made at proper place in proper time. It means that the customer should present the cheque for payment at the place of the bank where the customer’s account is maintained. It is also essential that the customer should demand payment on a working day, not on a holiday or a day which closed which is closed for public.
The demand made by the customer must be in the prescribed from as required by the bank. It means that, the demand for the refund of money deposited must be made through a cheque or an order as per the common usage among the bankers. Otherwise, the banker has every right to refuse the payment.
So far we have discussed the primary relationship between banker and customer. There are other types of relationships that are called secondary relationship.
2. Secondary Relationship:
A banker acts as an agent of his customers and performs a number of agency functions for the convenience of his customers. They are:
1. Purchasing and selling securities.
2. Collection of income.
3. Making periodical payments as instructed by the customers.
4. Collecting interest and dividend and on securities lodged by the customers.
5. Recieving safe custody valuables and securities lodged by the customers.
6. Collecting cheques, hundies, drafts of the customers.
Ordinarily a banker is a debtor of his customer in respect of the deposits made by the latter. But in certain cases, the banker acts as a trustee of the customer request the banker to keep his valuables in a safe vault or one may request the bank to manage that fund for a specific purpose, which the bank does.
*The contents of Special Relationship will follow in my next post. Till then, #cheers*