Chapter – 6 Banker – Customer Relationship
• Banker and customer have a legal binding once they enter into an agreement. This binding arises from vast varieties of services provided by banks to depositors as well as borrowers. Each service provided calls for a contractual relationship. There are certain terms and conditions which are applicable to both parties- customer and banker.
• Such relationship is contractual in nature and based on the customs and usages of bankers. Courts in India have recognized some of these customs and usages. This makes the relationship as implied terms of contract.
• The very nature of contract between customer and banker revolves around three important aspects,(i) There is both implied and express terms in the agreement(ii) Duties owed by the bank towards the customer, and(iii) Duties owed by customer towards bank.
• Besides the above, bank may have certain common law duty of care. As such these duties may vary with the type of relationship between banker and customer and the nature of activities/services availed from bank or provided by bank from time to time.
• In practice besides legal relationship (financial relationship), bank enters into an emotional and social relationship with its customers.
• Such a relationship is normally long lasting but at the same time risk borne. Therefore, we should go into the details of the customer before engaging in this banker and customer relationship.
• Today’s business also demands that business of banking is to attract, acquire and retain right customers which makes it important that we should understand customer better and through Know Your Customer (KYC) guidelines find right and suitable customer for longer relationship.
• In order to understand the relationship, we have to understand the definition of customer and banker.