Under Section 5 (1) of Banking Regulations of , The relation is the debtor- creditor relation, the customer being law requires When the practices and usages among. The relationship between banker and customer is not only that of a debtor and The term banking may define as accepting of deposit of money from the Relationship as debtor and creditor. Act the banker is bound to honor his customer's cheque provided by Discloser permitted by bankers practice and wages. When customer deposits money in a bank the relationship of debtor in his Practice and Law of Banking sets out this relationship as follows.
Hulls 10 VLR L Weerasooria37 sums up the two courses of action seem to be open to the bank in this context; that is, either dishonor the cheque for want of funds or exercise discretion to grant the customer a temporary overdraft, since drawing of a cheque when funds are insufficient to meet it is equivalent to asking the bank for an overdraft 38 Another important concern for banks is the order of payment of cheques.
Duckworth LR 4 Ex ; Joachimson v. Bank of London 3 F The bank must either pay or refuse the payment by dishonour. The death of the customer terminates the authority given by the customer to the bank and would terminate the bank-customer relationship by operation of law. It also operates as an automatic countermand of any outstanding cheques.
See also, Westminster Bank Ltd. Hilton 43 TLR Punjab National Bank Ltd. See also, Freeman v. Standard Bank of South Africa Ltd. A request by the bank to re-present the cheque amounts to dishonour and the bank would be liable if the dishonour is wrongful.
Vagliano Bros  AC at Bank of New South Wales  Knox However, the Ordinance is silent on what amounts to countermand and, who is entitled to countermand. Clear, unambiguous, unequivocal and unmistakable instructions of the customer to the bank to stop payment are the prerequisites of an effective countermand. Collecting bank is the bank which collects cheques and receives the payment for the said cheques from the paying bank on behalf of its customer.
The first standard [i. It is also essential that the bank should be informed of the countermand properly. Institute of Bankers of Sri Lanka, at pp. Bank of England 17 CB ; Jones v. Gordon  2 AC ; Baker v. Barclays Bank  1 WLR The bank would be deemed to have acted without negligence where it has acted reasonably.
See for instance, Karak Rubber Co. Bank of Ceylon 59 NLR Midland Bank  2 All ER Apart from the legal requirement, the banking practice also jealously guards confidentiality of the customer accounts. National Provincial and Union Bank of England.
Article Storm: Debtor and Creditor Relationship
See also, Tournier v. The duty remains even after the closure of the account and the termination of the bank-customer relationship. National Provincial and Union Bank of England  1 KBitself identified that the duty is not absolute and recognized certain exceptions to the duty. Accordingly, a fiduciary duty could arise; 1. When the bank provides investment advice or financial advice to the customer,74 2. When the customer pledges an asset or signs a guarantee to secure the debt of another customer,75and 3.
When the bank acts as an agent or trustee for the customer. Hooley, Modern Banking Law 4 th ed Oxford: Oxford University Press, ; J.
Blair ed Banks, Liability and Risk 3rd ed. Depending upon the type of services rendered and the nature of transaction, the banker acts as a bailee, trustee, principal, agent, lessor, custodian etc. Bank as a Trustee: In case of trust banker customer relationship is a special contract. When a person entrusts valuable items with another person with an intention that such items would be returned on demand to the keeper the relationship becomes of a trustee and trustier.
Relationship between Banker and Customer
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 fee for safekeeping valuables 2. A "bailment" is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the "bailor". The person to whom they are delivered is called, the "bailee".
Banks secure their advances by obtaining tangible securities. In some cases physical possession of securities goods Pledgevaluables, bonds etc. While taking physical possession of securities the bank becomes bailee and the customer bailor. Banks also keeps articles, valuables, securities etc.
As a bailee the bank is required to take care of the goods bailed. The relationship between the bank and the customer is that of 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. 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. Banks collect cheques, bills, and makes payment to various authorities viz. Banks also abides by the standing instructions given by its customers. In all such cases bank acts as an agent of its customer, and charges for these services. As per Indian contract Act agent is entitled to charges.
No charges are levied in collection of local cheques through clearing house. Charges are levied in only when the cheque is returned in the clearinghouse.Introduction to Law: Debtor/Creditor Rights
A custodian is a person who acts as a caretaker of something. While opening a dmat account bank becomes a custodian. Banks give guarantee on behalf of their customers and enter in to their shoes. The relationship between banker and customer is not only that of a debtor and creditor. However, they also share other relationships.
Banker The term banking may define as accepting of deposit of money from the public for the purpose of lending or investing investment of that money which are repayable on demand or otherwise and with a draw by cheque, draft or order. Features of Banking The definition of banking describes the following features of banking.
A banking company must perform both of the essential functions. Lending or investing the same: The phrase deposit of money from the public is significant. The bankers accept a deposit of money and not of anything else. The definition also implies the time and made to withdrawing of the deposit. The deposit money should be repayable to the depositor on demand made by the letter or according to the agreement reached between the two parties.
Banking: LESSON 10 BANK CUSTOMER RELATIONSHIP: CONCEPT AND CASES
Bank is an Agent, Trustee, Executor, Administrator for Customers Customer A person who has a bank account in his name and for whom the banker undertakes to provide the facilities as a banker is considered to be a customer. To constitute a customer the following requirements must be fulfilled; The bank account may be savings, current or fixed deposit must be operated in his name by making a necessary deposit of money. The dealing between the banker and customer must be of the nature of banking business.