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Unit 2

A banker is defined as someone who honors checks drawn on them from account holders and receives deposits to hold on current accounts. Banking involves accepting deposits from the public for the purpose of lending or investment. A key feature is that deposits must be repayable on demand by the account holder through methods like checks, drafts or orders. A customer is considered anyone who has an account and conducts regular banking business with a branch. The relationship between banker and customer is a transactional one based on the products and services provided and used.

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52 views

Unit 2

A banker is defined as someone who honors checks drawn on them from account holders and receives deposits to hold on current accounts. Banking involves accepting deposits from the public for the purpose of lending or investment. A key feature is that deposits must be repayable on demand by the account holder through methods like checks, drafts or orders. A customer is considered anyone who has an account and conducts regular banking business with a branch. The relationship between banker and customer is a transactional one based on the products and services provided and used.

Uploaded by

nothinghereguyz
Copyright
© © All Rights Reserved
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Download as PPTX, PDF, TXT or read online on Scribd
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Who is a Banker?

"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”.

An attempt has, however, been made in formulating a definition of


"Banking' and ‘Banking Company', of the Banking Regulations
Act, 1949 as under:

"Banking means the accepting, for the purpose of lending or


investment, of deposits of money from the public, repayable on
demand or otherwise, and with drawable by cheque, draft,
order or otherwise" and 'Banking Company' means any
company, which transacts the business of banking. Sec. 5(i)(b).
Salient Features
• A Banking Company must perform both the essential functions,
- accepting of deposits
- lending or investing the same

The Deposits may be of different types- Current, Fixed, Savings,


etc.,- accepted on various conditions
Any money accepted as deposits must be for the purpose of lending
or investment.

If the purpose of accepting of deposits is not to lend or invest the


business will not be called banking business
• 1,00,000 FD
Need of 50,000 ----- Breaking FD @ 2years
Loan against FD
Eff – 50,000 FD and - Loan ag FD will b 50,000
Loan@ 10%
FD @7% (returns)

Effectively 3% int payable on 50,000


FD 50,000 Rec after maturity.
Phrase 'Deposit of Money From The Public’
Banker accepts deposits of money and not of anything
else
The word 'public' implies that the deposits are
accepted from anyone who offers the same for the
purpose.

• The banker, however, can refuse to open account in


the name of the person who is considered
undesirable, e.g., a thief, robber, etc.
• The deposited money should be repayable to the depositor,
on demand made by the later or according to the agreement
reached between the two parties.

• Such deposits must be withdrawable by cheque, draft, order


or otherwise.

• The essential feature of banking business is that the banker


does not refund the money at its own.
The depositor must make a demand for the same in a proper
manner and through an instrument in writing and not merely
by verbal order.
Who is a Customer?
• No statutory definition of "customer' of a Bank.

The word is obviously derived from ‘custom' and would


normally denote the habit of resorting to the same place or
person to do the business and would require some
recognizable course of habit of dealing with the bank in the
nature of regular Banking business.

• Ordinarily, A person who has an account with a bank is


considered its customer.

• A person who has a bank account in his name and for whom
the banker undertakes to provide the facilities as a banker, is
considered to be a customer.
Requisites of Customers
• A bank account-savings, current or fixed deposit- must be
opened in his name by making necessary deposit of money

• The dealing between the banker and the customer must be


of the nature of banking business.

• If a person obtained from a bank an agreed overdraft/loan,


never paying in, but paying interest and drawing cheques on
the account will also become a customer as the essential
criteria of an account with the bank would have been fulfilled
and all that would happen is that in such a case instead of the
bank being a 'debtor' the customer would be a 'debtor’.
A customer of a banker need not necessarily be a
person. A firm, limited company or any other legal
entity, Government department/corporation may
be a customer of a bank.

A customer of one branch is not a customer unless specifically


authorized under e-banking of another branch of the same
bank, where he/she does not maintain any account.
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.
Categorizes of Bank Customers

• Existing Customers
• Former Customers
• Prospective/ Potential Customers

• Near to Zero Customers


- Very interesting category of customer, they 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.
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 & 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 & 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

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