Who is a customer? Meaning of a customer - 

  According to the Chambers dictionary," a customer is one who is accomplished to frequent a certain place of business.

   According to Black's law dictionary, "a customer is a person who regularly or repeatedly makes purchases of, or has business dealings with, a tradesman or business.

Customer of the bank - 

   According to Dr. Heart, " A customer is one who has an account with a Banker or for whom a Banker habitually undertakes to act as such."

Relationship between banker and customer -

the relationship between a Banker and customer is basically contractual. It is regulated by

(i) The general provisions of the Law of contract

(ii) The rule of agency, where applicable and

(iii) Banking practice

There can be the following type of relationship between banker and customer -

1) Debtor and creditor relationship

2) Banker as a trustee

3) Banker as agent

4) Bailee and Bailor

Termination of the relationship between a Banker and a customer - 

The relationship between banker and customer may be terminated in any of the following ways -

1.By mutual agreement

2. Death of customer

3.Lunacy of customer

4. Notice to terminate

5. Bankruptcy

6. Order of court

7. Transfer of balance amount

1. By mutual agreement -

        The relationship between banker and customer may be terminated by mutual agreement.

2. Death of customer -

         Death of a customer is an obvious reason for terminating the relationship between banker and customer. On the receiving the notice of death of the customer the bank stops the payment. The dissolution of a corporation customer is equivalent to death.

3. Lunacy of customer - 

      The Lunacy of a Customer terminates the relationship between banker and a customer. Bankers authority to pay cheques is revoked by notice of insanity. But unless the evidence of insanity is fairly conclusive, the banker's wisest course would appear to be to treat the customer as sane in so that the banker is not held liable for damages for wrongful dishonor.

4. Notice to terminate - 

      In case of any current account, no such notice by the customer to a banker appears necessary. But if it is a deposit account the banker could insist on the notice period specified on the fixed deposit receipt/book.

5. Bankruptcy - 

        The bankruptcy or winding up of the bank is a sufficient ground for terminating the relationship between a Banker and customer.

6. Order of court - 

       If the court restrains the banker to carry on further of the banking business, the account of the customer comes to an end.

 7. Transfer of balance amount - 

      If the customer transfers the whole amount of balance of his account to any other person, then the account may be closed by the banker. In this way the relationship of banker and customer comes to an end.

See also...

1.  What is Hundi/Poorja in Business Law, Kinds of Hundies

2.  What is bank Draft? What are the Characteristics of Bank Draft

3.  Management of Reserve Bank of India (Section 7 of RBI Act)

4.   Reserve Fund (Section 17 of the Banking Regulation Act,1949)

5. Power of bank to file winding up petition (Section 45MC of the Reserve bank of India Act 1934)


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