Who Is a Customer in Banking?
A simple definition of who is a customer in banking is a person who has a bank account. If a person makes a transaction without a bank account, the person cannot be called a customer of the bank. The person should have regular transactions with the bank and these transactions should be of banking nature.
The following conditions need to be met to understand who is a customer in banking?
- There should be identifiable transactions between the person concerned and the bank, not a transaction, but a period of transactions between the person and the banker.
- The transactions between the person and the banker should be of banking nature. In case of informal transactions, the person cannot be called a customer.
Who Is a Customer in Banking? and Its Types –
1. Minor or Infant –
who is a customer in banking – According to Indian treaty law, an ignorant person is ineligible to enter into an agreement and the agreement made with him is in vain. Yet it can happen and its benefits can be reaped. He can draw a check and endorse it. Account can be opened in anonymous name. At the time when an unknown person becomes savvy, the application form for signing the account is taken from them anew. The date of birth of the unknown should be recorded by the bank with proper proof.
The court may select a person as the guardian of the child whose parents are not alive.
2. Joint account –
who is a customer in banking – A joint account is opened by more than one person to facilitate transactions in the account or to avoid complications in case of death of a person in a joint account. A joint account is neither a partnership nor a trust.
3. Partnership Firm –
who is a customer in banking – A partnership account is a kind of joint account. More than two but less than twenty persons come together to do business and become partners by written or oral register or unregister agreement to share the profit and loss (there is a maximum limit of 10 partners for banking business).
It is not a requirement to have a partnership register for opening a bank account, but for other transactions like loans, the partnership must be registered and the partnership must be registered under the Indian Partnership Act, 1932.
4. Illiterates –
who is a customer in banking – Individuals who are illiterate can open a deposit account in a bank with proper identification. However, he will not be able to open accounts transacted by check ex. current account. The illiterate account holder should be reminded about the importance of keeping the passbook, deposit receipt carefully and taking care of the thumbs up on blank withdrawal.
5. Blind person –
who is a customer in banking – If an illiterate person has a contract under the law, the same care should be taken in case of a blind person to open his account. Even if a blind person can sign, but the key is not readable, the blind person is also photographed with a thumbprint in front of a witness.
6. Sole proprietorship –
who is a customer in banking- The account of a sole proprietorship opened in the name of trade and transaction is a personal account. Only the transactions in this account are done by the person acting as proprietor on behalf of the firm.
7. Married women –
who is a customer in banking – Married women can open bank accounts. However, care must be taken while dealing with debt to a married woman.
8. Insolvents –
who is a customer in banking – A person notifies all his creditors that he cannot pay their dues and a petition is filed in the court declaring himself bankrupt. All transactions in the bank account of such person should be stopped immediately by the bank.
The bank should take necessary care after receiving the information of bankruptcy of the account holder through official and unofficial means.
9. Lunatic, Insane –
who is a customer in banking – According to Section 11 of the Indian Contract Act, 1972, a person who is insane cannot enter into a valid contract as he is not able to understand the rights and responsibilities arising out of the contract. If an account holder goes insane after opening an account, transactions in such person’s account should be stopped immediately.
If the account holder has been reinstated, the transactions of such account holder should be suspended till convincing evidence is obtained.
10. Drunk person –
who is a customer in banking – According to Indian treaty law, a contract should be entered into when the person making the contract is in good condition, that is, when he is aware of what we are doing. If the contract is made when the person is not in good condition, then the transaction is not effective. Therefore, the customer should be in good condition at the time of opening the account as well as at the time of lending, he should not be drunk.
11. Trust –
who is a customer in banking – According to the Indian Trust Act 1982, the functions of a trust are governed. The person appointed as trustee has to be able to enter into an agreement. If the trust is a public charity then it is registered with the charity commissioner.
Even if the trust account is opened in the name of trustee, the trustee does not have personal rights over it.
12. Clubs, Societies, Associations –
who is a customer in banking – Accounts of clubs, schools, libraries, societies, associations registered under the Societies Registration Act or other laws which are non-commercial pages can be opened in the bank.
13. Limited Company –
who is a customer in banking – A company is an artificial person created by law. Under the Companies Act of 1956, a public limited or private limited company is registered. Private Limited Company has a minimum of 2 members and a maximum of 50 members. The shares of this company are not sold in the share market. This can be done after getting the certificate of incorporation.
A public limited company has a minimum of 7 and a maximum of unlimited members. The shares of this company can be sold in the share market. Member shares can classify anyone. Cannot do this without getting certificate of incorporation, certificate of commencement.
As suggested by the Indian bank association, the decision not to give the chief executive the right to start a current account with a limited company can be taken by the board of directors of the company unanimously.
14. collection account –
Maharashtra State Electricity Board, L.I.C. Municipalities, or other institutions open their own current accounts at a bank branch to repay their bills or other amounts in cash or by check.
Prior permission of Head Office is required for opening such accounts. The head office will fix the terms and conditions and exchange rate with the concerned institution considering the manpower and time required for the amount deposited in such account with the bank.
The relationship between the customer and the bank
After understanding who is a customer in banking ? The relationship between the customer and the bank is based on the type of services the bank provides to the customer. To understand the relationship between the customer and the bank, we need to understand what is bank and banker
Bank – A bank is an institution that accepts deposits and gives loans.
Banker – A banker is a person who does banking business in a bank.
Relationship between Bank and Customer
|General Relationship –||Special Relationship –|
|1. Relationship of debtor and creditor||1. Bankers obligation to honour cheque|
|2. Relationship of trustee and beneficiary||2. Banker’s lien|
|3. Relationship of principal and agent||3. Secrecy of account|
|4. Relationship of lesser and lessee||4.Bankers right to set-off|
|5. Relationship of bailer and bailee|
A. General relationship –
1. Relationship of debtor and creditor –
When a person opens a bank account, the person keeps his money in the bank, so the bank becomes a debtor and the customer becomes a creditor.
2. Relationship of trustee and beneficiary –
When the customer keeps the documents, securities or anything else in the bank locker to keep it safe, then the relationship between the customer and the bank becomes trustee and beneficiary. Bank trustee and customer beneficiary.
3. Relationship of principal and agent –
When the bank collects cheque bills and other instruments for the customer, the customer is the principal and the bank becomes agent.
4. Relationship of lesser and lessee –
When the customer rents the locker in the bank, the bank is lesser and the customer is lessee.
5. Relationship of bailer and bailee –
The customer is a bailer and the bank bailee when the customer keeps their valuables like bonds securities or anything else in safe custody.
|Collection Of Cheque||Agent||Principal|
|Payment Of DD||Trustee||Beneficiary|
B. Special relationship –
1.Secrecy of account –
When a customer opens a bank account, he expects his account to be kept confidential. Even if the customer closes the account, his account information cannot be disclosed to the bank. If the bank discloses such information, the bank has to compensate the concerned customer.
But sometimes the reasons why the bank has to disclose such information are as follows –
- Under law – The banker can disclose the account information of the customer only if the Companies Act 1956, RBI Act 1934, Income tax Act 1961, Bankers Book Evidence Act 1981 are applicable to him.
- With the consent of the customer – when the customer himself gives some or all the details of his account to the authorized person, his lawyer, C.A, secretary etc. The bank may share such information with the person concerned when it gives written consent.
- Disclosure in Bank’s Interest – When the bank recovers the amount due or seeks legal action against the customer, the bank’s lawyer is allowed to disclose the account information to the court.
- Disclosure in Public Interest – The bank can disclose the account holder’s information only when it is in public duty. Ex. In case of some illegal transactions, fake transactions etc., such information can be disclosed to the government.
- Common courtesy among the business – when a customer is questioned by another bank ex. Proposed security or acceptors of bill of exchange Etc.
2. Banker’s Obligation to Honour Cheque –
When the customer opens a current account in the bank and withdraws the cheque from that account for payment to other persons, then the cheque is withdrawn if the customer has money in the account. According to the negotiable instrument act 1881, if there is sufficient amount of money available in the rate account, such cheque is required to be paid. . The terms are as follows –
- Adequate funds must be available- Funds must be available in the account so that the cheque issued by the customer can be passed. If sufficient funds are not available, then the cheque is dishonoured.
- Cheque should be properly submitted – Cheque should be properly written if there are no errors in it and if it is submitted by due date.
- There should be no legal impediment to the payment of checks – if an account has been issued by a court on such an account, the check cannot be paid from such account.
3. Banker’s lien –
Lien is a right to hold the property with the bank until the debtor repays the loan. In short, the right to retain someone else’s property.
- particular lien – Retention of the respective property creditor till the loan is repaid.
- General lien – The banker has the right to retain the goods and securities assigned to him by the customer as a banker.
4. banker’s right to set – off –
It is the banker’s prerogative to combine or set-off the debit and credit balance of two or more similar accounts of the customer.
Services provided by banks –
One of the important functions of banks is to transfer money from one place to another on behalf of the customer. Nowadays money is sent online so the money gets to the person who wants to send it quickly, securely. The following methods are used to send money.
1. Cheque –
The name of the person to whom you are sending money can be written on the cheque. Giving a cheque to a local person can pass in clearing. You can also send money by cheque to a person from other village.
2. Demand Draft –
Demand Draft is a cheque drawn by a branch of a bank on its own branch. The bank branch should be located in the village to which the money is to be sent. Demand Draft consists of four parties. Demand Draft Buyer is known as Purchaser. The branch from which Demand Draft is purchased is called Drawer. The branch from which Demand Draft is paid is called Drawee. Is called payee. Demand draft should always be an order because if the bearer draws a demand draft, it can be used as a currency note.
3. RTGS (Real Time Gross Settlement) –
Currently the most popular form of remittance is RTGS through RBI. Real time means the exchange of money in the shortest possible time, not the waiting period. Money is sent as it is processed. One of the transactions is done in this way. Transactions are not done in bunch. Once the payment is made, the transaction is completed, the transaction cannot be canceled or stopped. RTGS is done on an amount of above 2 lakh. Charges for RTGS are charged by the bank. The following are required for RTGS.
- IFSC code of the bank to which the money is to be sent
- Account number of the person to whom the money is to be sent
4. NEFT – (National Electronic Fund Transfer)
This is also a very convenient way to send money or deposit money in the account through internet. The National Electronic Fund Transfer scheme is also implemented through RBI mediation. There is no amount restriction. Money can be sent very fast with this method.
5. EFT (Electronic Fund Transfer) –
Electronic Fund Transfer is a method of transferring money through computer. RTGS and NEFT are two types of EFT.
6. Sending PC via mobile –
With the advent of mobile like e-banking, net banking, any bank can transfer money to another customer’s account with the help of software developed by various companies.