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1. Banking can be defined as the business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to earn a profit.
2. A banker is one engaged in the business of receiving other persons money in deposit, to be returned on demand discounting other persons' notes, and issuing his own for circulation.
3. Customer is a person or organization that a marketer believes will benefit from the goods and services offered by the marketer's organization.
4. Kinds of banks are
a. Retail Banks
b. Commercial banks
c. Cooperative banks
d. Investment Banks
e. Specialized banks
f. Central banks
5. The Value of Integrity
The Value of Reliability
The Value of Love
6. Commercial bank is a type of financial institution that provides services such as accepting deposits, making business loans, and offering basic investment products.
SECTION B
1. 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.
‘BANKER’
As per Sec. 3 of the Indian Negotiable Instruments Act 1881, the word “banker includes any person acting as banker and any post office savings bank”.
According to Sec. 2 of the Bill of Exchange Act, 1882, ‘banker includes a body of persons, whether incorporated or not who carry on the business of banking.’
‘Customer’
The term Customer has not been defined by any act. The word ‘customer’ has been derived from the word ‘custom’, which means a ‘habit or tendency’ to-do certain things in a regular or a particular manner’s.
RELATIONSHIP
i) A person or entity that maintains an account and/or has a business relationship with the bank;
(ii) One on whose behalf the account is maintained (i.e. the beneficial owner);
(iii) Beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and
(iv) Any person or entity connected with a financial transaction, which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single transaction.
2. ‘Banker-Customer Relationship:
The banker-customer relationship is that of a:
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 savings / fixed deposit / current account (with credit balance), the banker is the debtor, and the customer is the creditor. This is because the banker owes money to the customer. The customer has the right to demand back his money whenever he wants it from the banker, and the banker must repay the balance to the 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.
• A customer remains a creditor until there is credit balance in his account with the banker. A customer (creditor) does not get any charge over the assets of the banker (debtor). The customer's status is that of an unsecured creditor of the banker.
Creditor–Debtor:
• Lending money is the most important activities of a bank.
• The resources mobilized by banks are utilized for lending operations.
• Customer who borrows money from bank owns money to the bank.
• In the case of any loan/advances account, the banker is the creditor and the customer is the debtor.
• The relationship in the first case when a person deposits money with the bank reverses when he borrows money from the bank.
• Borrower executes documents and offer security to the bank before utilizing the credit facility.
2. SPECIAL RELATIONSHIP
Relationship of Pledger and Pledgee
The relationship between customer and banker can be that of Pledger and 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. Under this agreement, the assets or security will remain with the bank until a customer repays the loan.
Relationship of Licensor and Licensee
The relationship between banker and customer can be that of a Licensor and Licensee.
This happens when the banker gives a sale deposit locker to the customer.
So, the banker will become the Licensor, and the customer will become the Licensee.
Relationship of Bailor and Bailee
The relationship between banker and customer can be that of Bailor and Bailee.
1. 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.
2. Bailor is the party that delivers property to another.
3. 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.
Relationship of Hypothecator and Hypothecatee
The relationship between customer and banker can be that of Hypothecator and Hypotheatee. This happens when the customer hypothecates (pledges) certain movable or non-movable property or assets with the banker in order to get a loan. In this case, the customer became the Hypothecator, and the Banker became the Hypothecatee.
Relationship of Trustee and Beneficiary
A trustee holds property for the beneficiary, and the profit earned from this property belongs to the beneficiary. If the customer deposits securities or valuables with the banker for safe custody, banker becomes a trustee of his customer. The customer is the beneficiary so the ownership remains with the customer.
Relationship of Agent and Principal
The banker acts as an agent of the customer (principal) by providing the following agency services:
• Buying and selling securities on his behalf,
• Collection of cheques, dividends, bills or promissory notes on his behalf, and
• Acting as a trustee, attorney, executor, correspondent or representative of a customer.
Banker as an agent performs many other functions such as payment of insurance premium, electricity and gas bills, handling tax problems, etc.
Relationship of Advisor and Client
When a customer invests in securities, the banker acts as an advisor. The advice can be given officially or unofficially. While giving advice the banker has to take maximum care and caution. Here, the banker is an Advisor, and the customer is a Client.