Bank Customer Relationship

Termination of Bank Customer Relationship

Bank and Customer relationship:

The transactional relationship between a banker and a customer depends on the activities and the services provided the customers. The most important factor in building healthy relationship between a banker and customer is trust. With the increasing complexity of banking and fast paced digitization, the importance of safeguarding customer interest has taken a front seat. Types of Contracts between bank and customer:

There are two types of contracts between a bank and a customer, i.e. general contract and a special contract. The distinction between the two determines the duties and obligations of the bank towards customer.

• In lieu of the general contract, a bank is

This is done through implementation of various regulations imposed on the banking industry. These regulations vary with the type of the customer. The primary objective is to broaden the scope of performance of bank’s duties.

A customer is bound by the terms of a contract after signing it. However if the customer is adversely affected by fraud, misrepresentation or undue influence, then the law safeguards the customer against the terms of the contract. The contra proferentum rule, shields the customers in-case of ambiguity or bad-construction of rules. Variation clauses may be rendered void for uncertainty and are not considered as a part of the contract, until the customer is given reasonable notice of the variations. Customers need to accept the variations for them to be given legal effect.

• Statute Law Safeguards

Statute laws on the other hand regulate banks, legislation preventing unfair contract terms and consumer protection legislation gives wide scope for challenging the conduct of

In countries such as, the United Kingdom, Canada and Australia several suits against banks are instituted through consumer protection legislation.

Banks Duties at Termination of the Bank-Customer Relationship

• Generally court deals with termination of the bank-customer relationship, however few aspects of the relationship may prevail even after the termination, like the bank's duty of confidentiality with respect to the customer's claims will be valid even in the absence of the contract.

• In the event of termination, it is mandatory for the bank to pay its customers any credit balance left in their account. Fixed term deposit accounts mature at agreed time and cannot be terminated unilaterally.

• As per the Payment Services Regulations 2009, customers having current accounts or easy access savings accounts may terminate the relationship unilaterally any time by with-drawing out, unless a period of notice (not exceeding one month) has been agreed.

• However, termination by the bank in absence of any express contrary agreement or statutory mandate is possible only after reasonable notice. However the rule of reasonable notice does not apply to customer accounts with debit balances.