The Relation between Banker and Customer is Contractual. It is regulated by general provisions of the law of contract. The rules of agency, where applicable and banking practice. There may be the following relationship between banker and customer
General Relationship between Banker and Customer -
1) Debtor and Creditor -
There is a primary relationship between Banker and customer is debtor and Creditor. But who is what at a particular moment depends on the state of the customer's account. If the account shows a credit balance, the banker will be a debtor and the customer a creditor. But in case of debit balance or overdraft, the banker will be the creditor and the customer the debitor.
2) Trustee and Beneficiary Relationship -
The banker becomes a trustee when he accepts securities or valuable from the customers for safe custody. New bank of India Ltd v. P. Lal AIR 1962 in this case, it has been observed by the Supreme Court that where the amount is deposited by the customer for a purpose, the banker acts as a trustee with regard to the balance of the amount after fulfillment of the purpose.
3) Principal and Agent -
A Banker acts as an agent of his customer and performs a number of agency functions e.g the bankers collect cheques on his behalf and makes payment of various dues of his customer viz. insurance premium.
4) Bailee and Bailor Relationship -
A bank Function as a bailee when it keeps valuable articles, ornaments, title deeds, etc. of its customer. The bank takes custody of these things and it is implied the responsibility of the bank to return these things safely. Thus the bank is a bailee and the customer is bailor.
5) Other Social Relationship between Banker and Customer
The banker has an obligation to honor the cheques of the customer up to the amount standing to the credit of the customer's account.
The banker has to maintain the secrecy of his customer's account.
The banker can exercise a general lien over the documents
The banker is under obligation to suspend the operation of accounts by the customer on receipt of garnishee over from the court issued under Order 21, Rule 46 of the Civil Procedure Code 1908.
The banker can charge the interest for defaults in repayments of loan by the customer or for overdrawn amounts.
Licensing of banking companies (Section 22 of the Banking Regulation Act 1949)
Attendance of persons confined in prisons before Criminal Court