The Relationship Between a Banker and a Customer
The relationship between a banker and a customer is as follows:
- Contractual Relationship: The contract takes place the moment an account is opened by a customer with a bank and this contract remains valid till the customer operates his account as per the terms and conditions agreed between them.
- Debtor and Creditor Relationship: When a customer opens an account with a bank and maintains a credit balance, the banker assumes the position of a debtor and the customer assumes the role of a creditor. Money deposited with the bank becomes a debt due from him to the customer. The banker can use the money deposited with him by the customers in any manner according to his discretion, his only obligation being to repay the debt as and when demanded by the customer.
- Bailee and Bailor Relationship: A bank does not accept money from customers on the condition that it will not utilize the money and that the identical money (the same currency notes or coins deposited by the customer) will be returned. A banker provides for safe and deposit vaults and accepts documents and valuables for safe custody. Here, the bank is acting as a bailee and the relationship is that of bailee and bailor.
- Trustee Beneficiary Relationship: Banks also act as trustees and executors of the will of customers. A trustee is required to hold property and money and uses the trust money in accordance with the trust deed and uses it for the benefit of some other person known as the beneficiary. The legal position of a banker as a trustee is different from that of a debtor to the customer. When a bank receives a cheque from the customer for collection from another bank, the bank becomes a trustee till the amount of cheque is realized. Once, the amount is credited to the customer’s account, the banker assumes the position of a debtor.
- Principal-Agent Relationship: Banks perform many agency functions such as collection of cheques or drafts or bills, collection of interest and dividends on securities, arranging for remittances and payment of insurance premiums, etc., as per the instructions of the customers. In all such cases, the bank is acting as an agent of the customer.
In these cases, the position of a customer is that of the principal and the position of the banker is that of the agent.