ABA 328 TOPIC 4.pdf - RELATIONSHIP BETWEEN BANKER AND CUSTOMER The nature of relationship between a banker and customer depends upon the type of service

ABA 328 TOPIC 4.pdf - RELATIONSHIP BETWEEN BANKER AND...

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RELATIONSHIP BETWEEN BANKER AND CUSTOMER The nature of relationship between a banker and customer depends upon the type of service rendered by the banker. The services rendered by commercial banks in our country can be classified into two categories. (i) Traditional services (ii) New services TRADITIONAL SERVICES These services mainly relate to:- (i) Maintenance of different types of deposit accounts, e.g., savings, fixed and current deposit accounts, (ii) Grant of advances, through cash credit, overdraft and loan accounts and through purchasing/discounting demand and usance bills, (iii) Collection of cheques, bill of exchange and other instruments (inland and foreign) (iv) Issue of performance and financial guarantees, (v) Provision of remittance facilities by issue of drafts, mail transfers and telegraphic transfers. (vi) Provision of facilities of safe deposit and safe custody, and (vii) Purchase and sale of securities. CUSTOMER The term „customer‟ has not yet been statutorily defined. In common parlance the term customer means a person who has an account with the bank. Old banking experts used a lay emphasis on the duration for which a person maintained an account with the bank. For example, according to John Paget, “to constitute a customer there must be same recognizable course or habit of dealing in the nature of regular banking business….it is difficult to reconcile the idea of a single tra nsaction with that of a customer.” Thus according to this view, a person does not become a customer simply by opening an account with the bank. He should be in the habit of dealing with the bank, i.e., there should be some measure of continuity in his dealings with the bank.
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The above viewpoint, popularly known as “duration theory” has now been rejected. The case of Commissioner of Taxation V. English Scottish and Australian Bank , Lord Dunedin observed, “The word customer signifies a relationship in which d uration is not of essence. A person whose money has been accepted by the bank on the footing that the bank undertakes to honour cheques upto the amount standing to his credit, is a customer of the bank irrespective of whether his connection is of long or s hort standing.” The above view was also confirmed by the Kerala High Court in the case of Central Bank of India Ltd. Bombay V. Gopinatahn Nair and other. Their lordship observed:- “Broadly speaking, a customer is a person who has the habit of resorting to the same place or person to do business. So far as the banking transactions are concerned he is a person whose money has been accepted on the footing that the banker will honour his cheques upto the amount standing to his credit, irrespective of his conne ction being of short or long standing.” Thus, in order to constitute customer, a person should satisfy two conditions:- (i) He should have an account with the bank, whether fixed, savings or current.
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