RELATIONSHIP BETWEEN BANKER AND CUSTOMER
This Article is Written by [1] Shubham Kaurav, Intern under Legal Vidhiya
Introduction:
Relationships between bankers and customers are crucial to the banking sector. In their capacity as financial institutions, banks offer services that are essential to people, companies, and the economy as a whole. Thus, establishing and sustaining excellent customer relationships is essential for any bank to succeed. The nature of banker-customer relationships have changed recently as a result of the emergence of fintech and digital banking, and banks have had to adjust to suit the evolving requirements and expectations of their clients. This article looks at the value of banker-customer connections in the current banking environment and how banks may establish and nurture these relationships. Additionally, it examines the difficulties that banks encounter when establishing these connections and also the liabilities that arise in the case of dispute between the banker and costumer.
To better understand the concept, lets see what actually a banker and a costumer is
Banker:
The term “banker” can refer to a person or an organization engaged in the banking industry, which often entails taking customer deposits and using those funds to fund loans or investments.
An investment bank, commercial bank, or other type of financial organization may employ a banker. Depending on the particular institution and the job held, their duties may change. Tellers, loan officers, financial analysts, investment bankers, and executives are a few examples of common jobs in the banking industry.
Due to their role in facilitating the movement of money and credit across society, bankers play a significant role in the global economy. They are essential for controlling financial risk, funding people and enterprises, and influencing economic policy.
Customer:
Any person or organization with a financial account or other connection to a bank or other financial institution is considered a bank customer. Customers of banks can include people, companies, governments, or other organizations who utilize these services to manage their finances and assets.
As a bank customer, you have access to a variety of financial services, including the ability to deposit money, withdraw money, pay bills, apply for credit or loans, invest in savings accounts, and get advice or counsel on money matters from bank employees.
In order to open and maintain their accounts, bank clients often need to give the bank personal and financial information. They may also be subject to different fees, charges, and terms and conditions pertaining to the bank’s goods and services. In order to keep their customers’ business and uphold their image in the financial sector, banks work to offer them high-quality customer service, security, and convenience.
Different kind of relationship between bank and customer
Relationship of debtor and creditor:
The form and other requirements are filled out by the consumer when opening a bank account with the bank. He becomes a creditor of the bank when he deposits money in his bank account. The debtor is now the bank. The consumer’s choice is the only factor influencing the bank’s duties to do further business using their deposits. The bank is free to invest the money anyway it sees fit. The customer must follow a withdrawal process if he wishes to get his money back.
Relationship of pledger and pledgee:
When a client pledges items or papers with a banker as security for the fulfilment of a promise or the payment of a debt, the customer and the banker switch roles.
Relationship of bailor and a bailee:
[2]Indian Contract Act, 1872, Section 148 defines bailment, bailor, and bailee. A “Bailment” is the transfer of commodities from one person to another for a specific purpose, with the understanding that they will be returned after the purpose has been achieved or will be disposed of in accordance with the direction specified in accordance with the terms and circumstances of the contract. The individual providing the item is referred to as the bailor, and the recipient of the item is referred to as the bailee. Banks use some actual assets as security to protect their advances. They occasionally store priceless objects, land, and other things as security. As a result, the customer changes into the bailor and the bank changes into the bailee.
Relationship of lesser and Lesse
Lease, lessor, lesse, premium, and rent are defined under [3]Section 105 of the Transfer of Property Act, 1882. The right to use immovable property for a predetermined amount of time is transferred by signing a lease. The lessor is the transferor. Lessee is the name given to the transferee.
Beneficiary and Trustee Relationship
The role of a banker is that of a trustee when it receives money or other valuable securities. On the other hand, a bank benefits when it gets money and uses it in other industries.
Customers have the ability, under the Consumer Protection Act of 1986,[i] to register complaints with the proper consumer forums or courts in order to obtain compensation for any loss or harm they may have incurred as a result of the bank’s actions or inactions. The exact facts and circumstances of each case, as decided by the consumer forums or courts, would establish the bank’s obligation. There are various laws to protect the rights of the costumer. Some provisions are as follows
Relevant laws
Consumer Protection Act, 2019:
The Consumer Protection Act of 2019 is being implemented with the goal of securing and defending consumer interests. It offers consumers who are dissatisfied with the service of the service provider a means of getting their complaints addressed. [4]Section 2(1)(o) of this Act defines “service” as used in this Act. The definition of the word “services” is found in Section 2(1)(g) of the Act. Banking services are included in the list of services covered by the 1986 Consumer Protection Act.[5] Consumer forums can be used to file complaints about any type of service deficiency. A consumer is defined as a person who uses services for payment under Section 2(1)(d) of the Act.
[6]Lok Adalat Act
Lok Adalats are organised under the Legal Services Authorities Act, 1987. They are intended for the settlement of a dispute or potential dispute out of the courts. Lok Adalat derives by the consent of the parties or when the court is satisfied that the dispute can be settled by the Lok Adalat. They have to decide the matter based on the principle of equity, justice and good conscience. In case of a settlement, the award shall be binding on both the parties. No appeal should lie in any court against the award.
Banking Ombudsman:
[ii]Banking Ombudsman Scheme is a grievance redressal system. If a customer is dissatisfied with the service of the bank then he can approach the banking ombudsman for further action. It is introduced under Section 35A of the Banking Regulations Act, 1949.
Important features of the Banking Ombudsman Scheme
- Deficiency in service, non-acceptance of note of notes of small denominations without sufficient cause.
- Delayed or non-payment of inward remittance or delayed issuance of the draft.
- Non-adherence to prescribed working hours.
- Refusal to open a banking account without any valid reason.
- Levying of charges without any prior notice to the customer.
- Forced closure of deposit account without notice or sufficient reason.
- Refusal to close or delay closing accounts.
- Non-adherence to the fair procedure adopted by the bank or non-adherence to the fair procedure and function for customers laid down by the Banking Codes and Standard Board of India.
- Non-observance of Reserve Bank guidelines on engagement of recovery agents by banks.
- Non-observance of the Reserve Bank guidelines on interest rates.
Liablities under costumer protection act 1986
As per the Consumer Protection Act, 1986, the liability of a bank towards its customers can be summarized as follows:
Deficiency in Service:
A bank may be held accountable for deficiency in service if it does not deliver services to its clients in accordance with accepted banking practise. A bank’s failure to offer its customers with the necessary or expected services is referred to as a service deficit. This can relate to a variety of problems, including:
Failure to process transactions: When a bank fails to conduct transactions promptly or correctly, it may put the customer at risk of financial injury and inconvenience.
Poor customer service: Customers may become frustrated and dissatisfied if bank workers are unresponsive or unhelpful.
Account mismanagement: If a bank wrongly manages a customer’s account, such as by applying fees or interest in the wrong place, it may cause the customer financial harm.
Security lapses: Failure on the part of a bank to safeguard customer data and accounts from unauthorised access can result in fraud, identity theft, and financial loss.
Lack of sufficient product offers can result in client dissatisfaction and a lack of loyalty if a bank does not provide a wide enough selection of goods or services to fulfil their needs.
Unfair Trade Practises:
According to the Consumer Protection Act, banks are not allowed to use unfair trade techniques including deceiving clients or making false promises or representations. A bank may be held accountable for any loss or damage sustained by its clients if it is discovered to be involved in such practises. In general, unfair commercial practises by banks refer to any dishonest or fraudulent behaviour used to obtain an unfair advantage over clients. Here are a few instances of unfair business practises banks could use:
Advertising that is deceptive: Banks may employ deceptive or false advertising to market their goods or services. This can involve employing deceptive language to entice clients to sign up for a product or service, making false statements about the interest rates or fees connected with a certain account, or both.
Hidden fees:Banks may charge clients with unadvertised hidden fees that are not mentioned up front. Maintenance costs, overdraft fees, and ATM fees are just a few examples of these charges.
Discriminatory lending practises: Banks may use unfair lending techniques that disproportionately affect particular categories of individuals. For instance, a bank might be more inclined to reject a borrower’s loan application if it is based on that person’s colour, ethnicity, gender, or age.
Abuse and harassment: When clients are having trouble paying off their debts, banks may act in an aggressive or harassing manner towards them. This could entail making persistent phone calls or writing threatening letters that demand money.
Unfair debt collection techniques: Banks may use unethical debt collection techniques that idebt collection.nfringe on borrowers’ rights. This may involve threatening legal action, harrassing loved ones or coworkers, or employing dishonest means
Negligence:
Banks are required to operate with reasonable care and diligence towards their customers as part of their duty of care. A bank may be held accountable for negligence if it fails to take such care and diligence and causes loss or harm to its clients When a bank handles its clients’ accounts and transactions carelessly, it exposes the customer to financial loss or other harm. This is known as negligent handling by the bank. This can cover a variety of deeds or omissions, like failing to adequately confirm a customer’s identity, failing to spot fraudulent behaviour, or improperly carrying out a customer’s transaction request.
Examples of bank negligence might include a bank failing to spot suspicious activity on a customer’s account, resulting in the customer losing money to fraudsters, or a bank
improperly disclosing fees associated with a specific financial product, resulting in the customer paying unexpected fees.
The impacted consumer may be entitled to compensation for any financial losses or damages as a result of the bank’s negligence. However, proving bank negligence can be difficult because it calls for evidence that the bank violated the customer’s right to due diligence and that the violation directly resulted in the customer’s harm.
Fraud:
If a bank defrauds its customers through actions like unauthorised withdrawals, false documents, identity theft, etc., it may be held responsible for the resultant loss or harm. Fraud in the banking industry is defined as any intentional and dishonest conduct that is done to get anything of value, frequently money, by dishonest or illegal means. This can take many different forms, such as stealing private information, falsifying official documents, or coercing people into disclosing their financial information.
Employees, clients, or outside criminals are just a few examples of the internal and external actors who may commit banking fraud. Identity theft, check fraud, credit card fraud, and online phishing schemes are a few frequent types of banking fraud.
In order to avoid and identify fraud, banks take a variety of precautions. These include routinely monitoring customer accounts and transactions, putting in place strict authentication systems, and training staff to see and report unusual activity.
Breach of Contract:
Banks enter into contractual agreements with their clients, and if they break such agreements, they may be held accountable for any losses or damages those clients incur. A bank may violate a contract in a variety of ways. For instance, it might not fulfil a loan commitment, impose excessive costs, or perform services in a way that is not in accordance with the agreement. The opposite party may be entitled to damages in the event that the bank violates the agreement in order to make up for any losses sustained as a result of the violation.
The first thing to do if you think a bank has broken a contract with you is to check the contract’s provisions to make sure the bank’s conduct were, in fact, a breach. After that, get in touch with the bank to talk about the problem and make an effort to find a solution. In the event that this is unsuccessful, you could need to take legal action to enforce
Case laws:
In the case of Motigavri vs. Naranjidwarkadas, the Bombay High Court held that the relationship between banker and banker is that of a lender and borrower.
In the case of Canara Bank vs. Canara Sale Corporation and others, a wider approach was taken into consideration and it was held that a relationship between the customer of a bank and a customer is that of a debtor and creditor.
In the case of Surender S/O Laxman Nikose vs. Chief Manager and authorised officer, State bank of India, it was held by the Bombay high court that once the relationship between the banker and customer ends, it waives off every right including the right of lien.
Conclusion:
The development of the internet and other online tools has made the world a small, interconnected village. For better returns, people keep their cash and possessions in banks. People have occasionally reported seeing cases of online fraud, as we have witnessed. The regulation must please the customer while simultaneously guaranteeing total protection. If someone is proven to be accountable for the inaction or improper behaviour, the arbitrary practise of making loans to people with strong brand names should be stopped, and the account must be corrected. Everyone in the nation is worried about the mounting non-performing assets. It has an impact on the nation’s common people, either directly or indirectly. Therefore, we should be aware of the situation at hand and create legislation accordingly.
References:
Consumer Protection Act ,1986
Consumer Protection Act, 2019
Legal Services Authorities Act, 1987
Indian Contract Act,1972
Times of india
[1] second semester student of Lloyd Law College , Greater Noida
[2] Indian contract act,1872
[3] Section 105 of Transfer of Property Act, 1882
[4] Consumer Protection Act,2019
[5] Section 2 of Consumer Protection Act,1986
[6] Legal Services Authorities Act, 1987
[i] Consumer Protection Act,1986
[ii] Section 35A of the Banking Regulations Act, 1949.
