Importance Of 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. Bank’s business depends much on the strong bondage with the customer. The most important factor in building healthy relationship between a banker and customer is trust.

Sec.5(c) of Banking Regulation Act defines "banking company" as a company that transacts the business of banking in India. Since a banker or a banking company undertakes banking related activities we can derive the meaning of banker or a banking company from Sec 5(b) as a body corporate that:

(a) Accepts deposits from public.

(b) Lends

(c) Invests the money so collected by

International rules and regulations governing bank-customer relationship:

a. Common Laws for Regulation of Banks

In today’s modern world, the bank-customer relationship has grown above the barriers of a contractual relationship. The State also has an important stake in regulating the bank-customer relationship.

The State acts as a guardian of the customers and mandates the banks to meet standards purportedly in the interest of the customers. 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 affected by fraud, misrepresentation or undue influence, then the law safeguards the customer.Under the contra proferentum rule, exclusion clauses are construed against the bank, in cases of ambiguity or construction failure of rules. Variation clauses may be rendered void for uncertainty and may not become contractual terms until the customer is given reasonable notice of the variations. Customers need to accept the variations for them to be given legal

Legal provisions for terminating the bank-customer relationship:

 Death of the customer – however the estate of the deceased could have access to the account after producing the certificate of death and other proof documents.

 Mental incapacity of the customer – the trustees appointed legally however might have access to the account on his/her account.

 Insolvency/winding up (company) or Bankruptcy (individual) of the customer – in the case of bankruptcy the trustees would be the ones to proceed; a new relationship may be formed between the bank and the trustee in bankruptcy or the liquidator.

 Insolvency of the bank - where the bank is incompetent and is declared bankrupt.

 The mutual agreement of both parties- bank pays out any credit balances.

 Voluntary termination - the customer is allowed to liquidate the deposit with bank and close the account.

 Liquidation of the company – winding-up or dissolution of a bank, which can be mandated by law or voluntary. If not declared bankrupt, the bank has to settle the accounts of the customers.

 The closing of the account by the bank after giving due notice.

 The completion of the contract or the specific transaction pertaining to the