Banker Customer Relationship – A Closer Look

When a customer come to a Bank and does any transaction or activity, there is a relation between Customer and Bank. The relationship between a banker and a customer depends upon the nature of services provided by the banker.

In this post we learn what are the different types of Banker and Customer Relationship when a customer does a particular type of transaction in Bank.

Main Banker Customer Relationship

Following are the different types of the Bank and Customer Relationships:
1. Debtor and Creditor
2. Trustee and Beneficiary
3. Pledger and Pledgee
4. Agent and Principal
5. Licensee and Licensor
6. Bailor and Bailee
7. Advisor and Client
8. Hypothecator and Hypothecatee

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Banker Customer Relationship of Debtor and Creditor

When a customer opens an account with a bank and if the account has a credit balance, then the relationship is that of debtor (banker / bank) and creditor (customer).

In case of savings / fixed deposit / current account (with credit balance), the banker is the debtor, and the customer is the creditor. This is because the banker owes money to the customer. The customer has the right to demand back his money whenever he wants it from the banker, and the banker must repay the balance to the customer.

In case of loan / advance accounts, banker is the creditor, and the customer is the debtor because the customer owes money to the banker. The banker can demand the repayment of loan / advance on the due date, and the customer has to repay the debt.

A customer remains a creditor until there is credit balance in his account with the banker. A customer (creditor) does not get any charge over the assets of the banker (debtor). The customer’s status is that of an unsecured creditor of the banker.

The debtor-creditor relationship of banker and customer differs from other commercial debts in the following ways:

The creditor (the customer) must demand payment. On his own, the debtor (banker) will not repay the debt. However, in case of fixed deposits, the bank must inform a customer about maturity.

The creditor must demand the payment at the right time and place. The depositor or creditor must demand the payment at the branch of the bank, where he has opened the account. However, today, some banks allow payment at all their branches and ATM centres. The depositor must demand the payment at the right time (during the working hours) and on the date of maturity in the case of fixed deposits. Today, banks also allow pre-mature withdrawals.
The creditor must make the demand for payment in a proper manner. The demand must be in form of cheques; withdrawal slips, or pay order. Now-a-days, banks allow e-banking, ATM, mobile-banking, etc.

Banker Customer Relationship of Trustee and Beneficiary

A trustee holds the property papers for the beneficiary and the profit earned from this property belongs to the beneficiary. If the customer deposits securities or valuables with the banker for safe custody, banker becomes a trustee of his customer. The customer is the beneficiary so the ownership remains with the customer.

Banker Customer Relationship of Pledger and Pledgee

The relationship between customer and banker can be that of Pledger and Pledgee. This happens when customer pledges (promises) certain assets or security with the bank in order to get a loan. In this case, the customer becomes the Pledger, and the bank becomes the Pledgee. Under this agreement, the assets or security will remain with the bank until a customer repays the loan.

Banker Customer Relationship of Agent and Principal

The banker acts as an agent of the customer (principal) by providing the following agency services:

Buying and selling securities on his behalf.

Collection of cheques, dividends, bills or promissory notes on his behalf, and

Acting as a trustee, attorney, executor, correspondent or representative of a customer.
Banker as an agent performs many other functions such as payment of insurance premium, electricity and gas bills, handling tax problems, etc.

Banker Customer Relationship of Licensee and Licensor

When the banker gives a safe deposit locker to the customer, the banker will become the Licensor and the customer will become the Licensee.

Banker Customer Relationship of Bailor and Bailee

The relationship between banker and customer can be that of Bailor and Bailee.

Bailment: Bailment is a contract for delivering goods by one party to another to be held in trust for a specific period and returned when the purpose is ended.
Bailor: Bailor is the party that delivers property to another.
Bailee: Bailee is the party to whom the property is delivered.

So, when a customer gives a sealed parcel/box to the Bank for safe keeping in bank premises, the customer became the bailor, and the bank became the bailee.

Banker Customer Relationship of Advisor and Client

When a customer invests in securities, the banker acts as an advisor. The advice can be given officially or unofficially. While giving advice the banker has to take maximum care and caution. Here, the banker is an Advisor, and the customer is a Client.

Banker Customer Relationship of Hypothecator and Hypothecatee

When the customer pledges/hypothecates certain movable or immovable property or assets with the banker in order to get a loan, the customer became the Hypothecator and the Banker became the Hypothecatee.