Banker Customer Relationship
The relationship between a banker and a customer depends on the activities; products or services provided by bank to its customers or availed by the customer. Thus the relationship between a banker and customer is the transactional relationship. Bank’s business depends much on the strong bondage with the customer. “Trust” plays an important role in building healthy relationship between a banker and customer.
Thus bank customers can be categorized in to four broad categories as under:
- Those who maintain account relationship with banks i.e. Existing customers.
- Those who had account relationship with bank i.e. Former Customers
- Those who do not maintain any account relationship with the bank but frequently visit branch of a bank for availing banking facilities such as for purchasing a draft, encashing a cheque, etc. Technically they are not customers, as they do not maintain any account with the bank branch.
- Prospective/ Potential customers: Those who intend to have account relationship
with the bank. A person will be deemed to be a ‘customer’ even if he had only
handed over the account opening form duly filled in and signed by him to the bank
and the bank has accepted the it for opening the account, even though no
account has actually been opened by the bank in its books or record.
Classification of Relationship:
Debtor and Creditor:
When a customer opens an account with a bank and if the account has a credit balance, then the relationship is that of debtor (banker / bank) and creditor (customer).
In case of loan / advance accounts, banker is the creditor, and the customer is the debtor because the customer owes money to the banker. The banker can demand the repayment of loan / advance on the due date, and the customer has to repay the debt.
Pledger and Pledgee:
This happens when customer pledges (promises) certain assets or security with the bank in order to get a loan. In this case, the customer becomes the Pledger, and the bank becomes the Pledgee.
Licensor and Licensee:
When the banker gives a safe deposit locker to the customer, the banker will become the Licensor and the customer will become the Licensee.
Bailor and Bailee:
The relationship between banker and customer can be that of Bailor and Bailee.
- Bailment is a contract for delivering goods by one party to another to be held in trust for a specific period and returned when the purpose is ended.
- Bailor is the party that delivers property to another.
- Bailee is the party to whom the property is delivered.
So, when a customer gives a sealed box to the bank for safe keeping, the customer became the bailor, and the bank became the bailee.
Hypothecator and Hypothecatee:
When the customer hypothecates (pledges) certain movable or non-movable property or assets with the banker in order to get a loan, the customer became the Hypothecator, and the Banker became the Hypothecatee.
Trustee and Beneficiary:
A trustee holds property for the beneficiary, and the profit earned from this property belongs to the beneficiary. If the customer deposits securities or valuables with the banker for safe custody, banker becomes a trustee of his customer. The customer is the beneficiary so the ownership remains with the customer.
Agent and Principal:
The banker acts as an agent of the customer (principal) by providing the following agency services:
- Buying and selling securities on his behalf,
- Collection of cheques, dividends, bills or promissory notes on his behalf, and
- Acting as a trustee, attorney, executor, correspondent or representative of a customer.
Banker as an agent performs many other functions such as payment of insurance premium, electricity and gas bills, handling tax problems, etc.
Advisor and Client:
When a customer invests in securities, the banker acts as an advisor. The advice can be given officially or unofficially. While giving advice the banker has to take maximum care and caution. Here, the banker is an Advisor, and the customer is a Client.
So, these were some important banker-customer relationships.
Termination of relationship between a banker and a customer:
The relationship between a bank and a customer ceases on:
- The death, insolvency, lunacy of the customer.
- The customer closing the account i.e. Voluntary termination
- Liquidation of the company
- The closing of the account by the bank after giving due notice.
- The completion of the contract or the specific transaction
- “Principles & Practices of Banking”, Tata McGraw-Hill, New Delhi.