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BankerPerson doing Banking Business
Earlier View:
“Banker includes a body of persons whether incorporated or not who carry on the banking business.”
Expert’s View:
The essential business of a banker is to buy money and debts by creating other debt. He is essentially a dealer in debts or credit.
DEFINITION
According to Sec 5(b) of Banking Regulation Act.
“Accepting for the purpose of lending and investment, of deposits of money from the public, repayable on demand, order or otherwise and withdraw able by cheque, draft, order or otherwise.”
CustomerEarlier Views:
There must be some sort of an account – either deposit or current account or similar relation – to make a man customer of a bank.
Second View:
To constitute a customer there must be some recognizable course or habit of dealing in the nature of regular banking business
Modern View:
Even a single transaction can constitute a person a customer.
Requirements to become a CUSTOMER:
He must have some sort of an account
Even single transaction may constitute him a customer.
Frequency of transaction is anticipated but not insisted upon.
The dealing must be of banking nature.
Relationship between a BANKER & A CUSTOMER1. General
Relationship
2. Special Relationship
Questions to be asked?
Is there a depositary relationship? A banker as a bailee! Is there a trustee relationship? Is there an agent relationship?
General RelationshipGeneral Relationship Special RelationshipSpecial Relationship
Debtor-Creditor Relationship Express Demand by
the creditor Particular branch Banking Hours Un-secured Law of Limitation Combine accounts
Obligation to honour cheques
Banker’s LienDuty to maintain
secrecyRight to claim
incidental chargesRight to charges
compound interestExceptions from the
law of limitation.
Banker-Customer Relationship
Obligation to honour Cheques
1. Availability of money
2. Correctness of the cheque
3. Proper drawing of he cheque
4. Proper application of funds
5. Proper presentation
6. Reasonable time for collection
Overriding the OBLIGATION Liability to the customer Assessment of damages
Damages“the smaller the amount of cheque the greater the damage” – principle
Ordinary Damage
Special Damage
Grounds of ConfrontationBreach of ContractNegligenceLibel
Implication of law:• Damage for breach of contract to pay
cheques• Damage to general drawer’s business• Damage to general reputation and credit• Damage for the negligence of the banker.
Obligation to PAY the BILLS!
Prior arrangements Indemnity Bonds.
Precautions:1. Particulars2. Stamp3. Due for payment4. Signature
Banker’s
LienRight to retain the goods
Kinds of Lien:
1.General Lien
2.Particular Lien
Circumstances of Exercising a lien:
1.Any agreement in consistent of lien
2.Acquired in the capacity of a banker
3.Not for specific purpose.
Lien cannot go beyond the agreement.
Banker’s lien as an implied pledge.
Lien on quasi & negotiable securities.
No general lien on Safe custody deposits.
No lien on documents entrusted for specific purpose.
No lien on articles left by mistake.Lien on securities taken back after
repayment of the loan.Lien on Bonds & CouponsNo lien until the due date of a
loan.No lien on deposits.
DISCLOSURES
The disclosure of the financial position of the customer may affect his reputation and bring considerable loss. If a customer suffers any loss on account of the unwanted disclosure of his account the banker will be compelled to compensate for the loss suffered by his customer.
General Acceptance1. Disclosure under the
compulsion of law2. Disclosure in the interest of
public.3. Disclosure in the interest of
bank.4. Disclosure under the
express or implied consent of customer
Disclosure under the Compulsion of LAW!
Sec 4 – Bankers Book Evidence Act – certified copy of customer’s account in his ledger.
Sec 285 – Income Tax Act – interest earned beyond Rs. 10000/-pa
Sec 45B – Reserve Bank of India Act – Collect Credit Information
Sec 26 – Banking Regulation Act – Annual return of deposits (unclaimed for 10 years)
Sec 36 – Gift Tax Act – Books of AccountExchange Control ActGarnishee Order Nisi
Disclosure in the Interest of the Public
Political PurposeUnlawful associationRevolutionary bodyEnemy at times of war.
Disclosure in the Interest of Bank
Disclosure of the account of the customer who failed to repay the loan to the guarantor.
Disclosure to a fellow bankerDefend the past action
General
Precaution1. Damage –
unreasonable disclosure
2. Loss – untrue & misleading information.
Negligent – InformationExpress ConsentBare FactsStrict ConfidenceFellow bankerExact balance
Right to claim incidental Charges
Service Charges
Processing Charges
Ledger Folio Charges
Appraisal Charges
Penal Charges
Handling Charges
Collection Charges
LF Chg Rs. 500/-pa Computerized Branch & Rs. 200/- others
Collection Charges