Answer to Question #311651 in Management for priyarajput

Question

As Retail Banking provides various types of products and services to its customers,

multiple types of ‘Banker–Customer’ relationships emerge. Name any 4 types of

Banker-Customer relationship and explain the fundamentals of the nature of the

applicable legal relationship

Answer 1

Banker-Customer relationship means that to become a customer account relationship is a must. Account relationship is a contractual relationship. Banking is a trust-based relationship. There are numerous kinds of relationships between the bank and the customer. The relationship between a banker and a customer depends on the type of transaction. Thus the relationship is based on contract, and certain terms and conditions.

The relationship can be;

a) Debtor and Creditor - When a ‘customer’ opens an account with a bank, he fills in and signs the account opening form. By signing the form he agrees/contracts with the bank. When a customer deposits money in his account the bank becomes a debtor of the customer and the customer a creditor. The money so deposited by the customer becomes the bank’s property and the bank has a right to use the money as it likes. The bank is not bound to inform the depositor of the manner of utilization of funds deposited by him. Bank does not give any security to the depositor i.e. debtor. 

b) Trustee and Beneficiary (Bank as the trustee and customer as the beneficiary) -  the case of a trust, a banker customer relationship is a special contract. When a person entrusts valuable items to another person with the intention that such items would be returned on demand to the keeper the relationship becomes of a trustee and trustier. Customers keep certain valuables or securities with the bank for safekeeping or deposits certain money for a specific purpose (Escrow accounts) the banker in such cases acts as a trustee. Banks charge fees for safekeeping valuables.

c) Bailee and bailor (Bank being the bailee and customer being the bailor) - Banks secure their advances by obtaining tangible securities. In some cases, physical possession of securities goods (Pledge), valuables, bonds, etc., are taken. While taking physical possession of securities the bank becomes bailee and the customer bailor. Banks also keep articles, valuables, securities, etc., of their customers in Safe Custody and act as a Bailee. As a bailee, the bank is required to take care of the goods bailed.

d) Lessor and the lessee (Bank being the lessor and customer being the lessee) - The relationship between the bank and the customer is that of the lessor and lessee. Banks lease (hire lockers to their customers) their immovable property to the customer and give them the right to enjoy such property during the specified period i.e. during the office/ banking hours and charge rentals. Bank has the right to break open the locker in case the locker holder defaults in payment of rent. Banks do not assume any liability or responsibility in case of any damage to the contents kept in the locker. Banks do not insure the contents kept in the lockers by customers.