The relationship between the banker and the customer arises out of the contract between them and cannot be created except by mutual consent. In the case of banking where a person is offered to open a bank account and once the customer accepts to open a bank account it takes the face of the contractual relationship.
The obligation of a customer:-
To repay overdrawing:-
Bankers generally allow overdraft facilities to its customers holding current accounts. The facility of the overdraft is to keep the reputation of its customers by the dishonor of cheque. Hence it’s the duty of the customer to pay the overdraft amount. Alike is the case with the credit card facility.
To pay bank charges
A customer is a duty bond for the services charges they enjoy from banks like locker facility, issues of demand draft, travel cheques, etc.
Operation of account
The customer should immediately notify any forged activities drawn on his account. It can help the banker and will not pay to honor the cheques drawn by the forged signature.
Duty of reasonable care in drawing cheques
The customers another self-regarding duty is to draw cheques on his account in a way which does not facilitate the alteration of the amount, failure to do so this, will entitle the customers bank to debit his account for the amount for which cheque appears to have been drawn if it pays that amount on presentation of the cheque and does so in good faith and without negligence.
Young v. Grote
It was held that the customer should take due negligence while drawing a cheque if he fails to do so, the bank will not be liable. In this case, the customer draws the cheque by leaving the gap in figures and words which resulted in the alteration of the cheque. The court held that the bank is not liable to pay the amount.
Non- drawing of cheque in insufficient of funds
The customer should not draw a cheque for the insufficiency of funs in the account which leads to the dishonor of the cheque and it is considered as a criminal offense. The customer can be punished with imprisonment for a term which may extend to 2 years and a fine double of the cheque.
Termination of relationship or closing an Account
The relationship can be terminated because of two reasons, first by the parties voluntarily at customers will and second by operation of law.
Termination by the customer
A customer may close his account at will without notice to a banker at any time in the following circumstances.
a. If the customer is not satisfied with the services of the bank.
b. If he cannot get required facilities from the banker
c. If he loses his confidence in the bank’s reputation, economic stability, etc.
d. If he does not agree with the terms and conditions of the bank.
Termination by the banker
• Death of the customer
As soon as the bank receives the information on the death of a customer he should stop the transaction and also should notify the information in ledgers and others. Reliable information includes the announcement in the newspapers, radio, or from relatives. In such a case banker should close the account and hand over the balance to the nominee or deceased heirs on the production of the death certificate.
• Customers insanity
The same is the case of insanity once the bank receives the information of the insanity of the customer, the banker should stop the transaction from his account and close the account. Later, the banker can reopen with the orders of the court or the certificate issued by the medical authorities.
• Customer Insolvency
The bank should stop the transaction of the account of the customer after receiving information about his becoming insolvent.
If the customer assigns his account with its fund to any other person and orders the bank for the assignment then the bank should handover the account to such a person.
• Winding- up of the company
If a company is wound up, the banker should act according to the instruction of the court.
• Closing of partnership firms
If the partnership firm is closed by the consent of partners or due to death of one or more partners, the bank should stop the transaction, and then close the account of the said firm.
• Customer of an enemy country
During the war period, if the customer belongs to an enemy country, the bank is justified in closing his account.
Bank closes the account of the customer on three other conditions:-
1) If a customer becomes fraudulent and turns to be a cheater
2) If customer harass the staff and behave in an indecent manner
3) If the customer spreads bad goodwill of banks in the world.
“The views of the authors are personal“
Frequently asked questions
Does the customer of a bank is a consumer?
Banking is a commercial function. Banking means acceptance, for the purpose of lending or investment of deposit of money from public repayable on demand and service. Consumer under Section 2(d) of the Consumer Protection Act, is the one who buys any goods for consideration or avails any services or hires any services for consideration. Hence the holder of the bank account of the customer of the bank is the consumer under the consumer protection act.
A service of the bank falls under Section 2 (1) (o) of the Consumer Protection Act?
A person hiring the services for consideration is the consumer. The deficiency of services on part of the bank can be held it liable for unfair trade practices. Hence the banking services falls under the ambit of Section 2(1) (o) of the consumer protection act.
Punjab National Bank v. KB Shetty
The complainant hired a bank locker. Due to negligence of the bank, the locker was found open and ornaments kept therein were found missing. It was held the consumer forum has jurisdiction in such case and the bank would be liable for negligence.