The Relationship Between Customer and Banker

Before taking up the relationship between a banker and his customer, it is necessary to understand the meaning and definition of the terms 'Banker" and "customer" about each other.

Meaning and Definition of Banker

Dr. Herbert L. Hart, an author on Law of Banking based on several legal decisions, defined the term "banker" as follows: ' A banker is one who in the ordinary course of his business, honors cheques drawn upon him by persons from and for whom he receives money on current accounts."

Sir John Paget, another great authority on banking has defined the term based on the essential functions performed by persons who claim to do the business of banking. According to him, "It is a fair deduction that no person or body corporate or otherwise, can be a banker who does not (1) take deposit accounts, (2) take current accounts, (3) issue and paycheques and (4) collect cheques ad uncrossed, for his customers".

Hence, according to Sir John Paget, a person or body claiming to be a banker myst professes himself to be one whose main business must be that of banking. Though this definition seems to be exhaustive, it does not make any mention of other important functions of the present-day banker, such as the agency and general utility quality utility services.

Meaning and Definition of Customer

The entire law relating to banking relates to the interplay of forces governing the relationship between a banker and a customer. The question arises as to who may be called a customer. According to Sir John Paget "to constitute a customer, there must be some recognizable course or habit of dealing like regular banking business. According to Herbert L.Hart,' a customer is a person who has an account with a banker.'. Hence, a person who keeps an account at the bank is its customer. All individuals or companies with whom they do business may properly be called customers. Therefore, a customer is a person who has the habit of restoring to the same place or person, to do business. So far, as banking transactions are concerned, he is a person whose money has been accepted on the footing that the banker will honor up to the amount standing to his credit, irrespective of his connection being short or long-standing.

General Relationship Between Banker and Customer

Generally, the relationship between a banker and a customer is as follows:

1. Debtor and Creditor
2. The Trusteeship
3. The Agency
4. Bailor and Bailee
5. Advisory
6. Licensor and Licensee
7. Lessor and Lessee

Debtor and Creditor Relationship

It has now been well settled that the first and foremost relationship between the customer and the bank is the relationship of a creditor and debtor. From this point of view, it would be interesting to refer to the view of Sir John Paget who states that the relationship of banker and customer is primarily that of debtors and creditors, the respective positions being determined by the existing state of the account. Instead of the money being set apart in a safe room, it is replaced by debt due from the banker. The money deposited with him becomes his property and is absolutely at his disposal, and save as regards the following of trust funds into his hand the receipt of his customer constitutes him merely the debtor of the customer with the "Superadded" obligation to honor his customer's cheques drawn upon his balance, in so far as the same is sufficient and available.

The contract between a bank and a depositor is not materially different from any other contract by which one person becomes bound to take charge of and repay another's funds, and there is a trust relationship between a bank and a general depositor. The relations between a bank and a depositor may be dual in character, the ban being the depositor's debtor concerning one thing and his agent concerning another or his debtor at one time and his agent at another, and while the relation between the bank and a depositor in respect to a general deposit is generally regarded as that of a debtor and creditor, yet in another sense, the depositor is the owner of the deposit, in that he can demand repayment at ay time.

The Trusteeship Relationship

The position of a banker as a trustee or as a debtor is determined according to the circumstances of each case. For example, in case of a cheque received by the bank from a customer for collection from another bank as a bill for collection, the banker acts as a trustee till the cheque is realized and credited to his customer's account and thereafter he will be the debtor for the same account As a trustee, it is his duty to take care of the lockers and their contents.

Where a banker, according to instructions, express or implied, has credited the proceeds of a bill or other document entrusted to him for collection, the relationship of debtor and creditor arises from the time of his doing so. Where, however, the banker has suspended his business before the receipt of such amount, he holds the money as a trustee for the customer, irrespective of whether or not the latter had an account with him not the date of the receipt of the money and whether or not the money had been credited in that account.

Agency Relationship

According to Sheldon, another service rendered by a banker to his customer is to collect his customer's cheque and another credit instrument. In these transactions, the relationship between the two parties is that of the principal and agents the banker acting as his customer's agent. This is because, in the course of business incidental to baning, a banker undertakes to perform services for the customer such as:

• Buying and selling securities on his behalf
• collection of cheques, dividends, bill or promissory notes on his behalf
• acting as a trustee, attorney, executor, correspondent, or representative of a customer

In the performance of all these functions, the banker acts as an agent of the customer.

The Bailor and Bailee Relationship

There is also another relationship between a banker and a customer which may be termed as the bailment relationship. This relationship usually arises when a customer of the bank avails himself of the safe custody facility offered by the bank. this relationship is termed as bailment i.e. the delivery of a person's property by one party (known as bailor) to another (known as bailee) on the condition express or implied that the property shall be returned to the bailor or shall be delivered son as the purpose for which the bailment was created is over. This is thus an agreement for a short period and in some of the cases, the bankers required articles for safe custody to be delivered in a sealed packet or boxes and he has to retain it with all the seals intact for the depositor or to one who has his order for the purpose. In some of the cases, it has been held that wrong delivery of the articles, kept with the banker f0r safe custody to an unauthorized person is nothing less than then conversion i.e. putting the goods bailed to ones on use and is, therefore, punishable under the law The bank is under no obligation to accept the property of the customer for the purpose of safe custody. IT is not even the primary function of the bank. IT is also not a basic condition required to be fulfilled for being termed as a banker. 

A bailment is a 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 direction of the persons delivering them. The person who delivers the goods is called the 'bailor' and the person to whom they are delivered is called the 'bailee'.

Advisory Relationship

After having discussed the relationship of the banker and customer as that of a bailor and a bailee, there may be another type of relationship. The bankers are performing multifarious and multi-dimensional functions. They are acting as a friend, philosopher, and guide for their customers.

Now is the time when the bank thinks about the creditworthiness of the purpose and of the object. The banks are stepping forward to provide help, guidance, suggestions, and advice relating to all investment opportunities and in most of the cases, suggestions are given which deal with the questions relating to investment and as a result of having a long experience the banners are in a position to give the best advice relating to financial investments. It is not a question of whether the bank is giving advice on investments when asked for, it can also be a question when the bank is acting as an advisor to its customers relating to various proposals in which the customers may be interested. Thus, the bank can give safety advice on investment.

Licensor and Licensee Relationship

When the articles and valuables are kept in a safe deposit locker with a banker, the banker-customer relationship is that of a licensor and licensee. In letting out a locker, there is no transfer of interest and the bankers need to be in full control of the lockers and the hired locker can't be again let out to some other person and it also cannot sue any other person in case any loss is used to be hired.

Lessor and Lessee Relationship

Lessor and lessee relationship can also take place if there is a transfer of interest relating to immovable property between the banker and its customers. Thus, the bank who constructs a multi-storied building and a part of which is let out to a customer who is regularly paying the rent to the bank for taking such premises, the relationship shall be that of lessor and lessee.