5/26/2024

What Is a Bank?

• A bank is a financial institution licensed to receive deposits

and make loans.
Banker Customer Relationship – General & • A Bank is a financial Intermediary, because it intermediates
between surplus unit of the society i.e. depositors and the
Special Types & their Legal Aspects deficit unit of the society i.e. borrowers.
• Banks are regulated by the central bank of the country i.e.
Bangladesh Bank.
• Just like any other business, the goal of a bank is to earn
a profit for its owners.
Sk. Nazibul Islam
• Banks make a profit by charging more interest/profit to
Former Faculty Member, BIBM
borrowers than they pay on savings and other accounts.

Banker
Banking • Generally, a person who is doing the banking
business is called banker.
• Receiving deposits. • A banker performs multifarious functions.
• Lending or investing these deposits. • A banker essentially be a man of wisdom.
• Repaying these deposits on demand by • He deals with others money but with his own
cheque or otherwise. faculties.
• A banker is not only acting as a depository, agent,
but also as a repository of financial advices.
• To be a banker, company’s main functions will
have to be ‘business of banking’.
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Customer

• Mere opening of an account will constitute a person • Those who do not maintain any account relationship with the
a customer of a bank. bank but frequently visit a branch of a bank to avail of banking
• The word “customer’ signifies a relationship in which facilities such as for purchasing a draft, receiving payment of a
duration is not of essence. Even a single transaction cheque over the counter etc. technically they are not customers,
may constitute him as a customer.
as they do not maintain an account with the bank branch.
• Frequency of transactions is anticipated but not
• Customer benefits can be considered on the safety of deposits
insisted upon.
held at banks; interest received for them; that the money held in
• The dealings must be of a banking nature.
bank accounts can be returned at any time upon request;
• A person or entity that maintains an account and/or
transfers of money to them, instead of wearing them large sums
has a business relationship with the bank may be
called as a customer. of cash.

Relationship between Banker and

Customer
• The relationship between a banker and a customer • Relationship between banks and their clients is
comes into existence when the banker agrees to open fiduciary/trustee one.
an account in the name of the customer. • It is based on trust and bank has to carry out their
• The relationship between a banker and a customer duties to the customer in utmost good faith and
due diligence.
depends on the activities, products, or services provided
by the bank to its customers or availed by the customer. • Bank’s supreme responsibility lies in protecting
customers deposit and secrecy about customers.
• Bank’s business depends much on the strong bondage
• Banks shall be impartial and non-discriminatory in
with the customer. their dealings with the customers.
• Trust plays an important role in building a healthy • Any favour or indulgence to any one client or
relationship between a banker and a customer. group of client will be considered violation of
fiduciary relationship.
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General Relationship: Principal and Agent:

• Debtor and Creditor: When a banker receives • When the banker collects cheques, bills,
deposits from a customer, he is technically said dividend warrants, pays insurance premium,
to borrow money from the customer. So, he is subscriptions etc. on behalf of his customer then
acting as a debtor who is bound to return the the agent – principal relationship exists between
money on demand to his creditor namely his a banker and his customer. Banker acts as an
customer. agent on behalf of their customer. So, customer
• But in the cases of a loan, cash credit and is the principal and bank being the agent.
overdraft, the banker becomes a creditor and
the customer assumes the role of a debtor.

Trustee and Beneficiary: Bailor and Bailee:

• When a person entrusts valuable items with an intention • This relationship arises out of contract of bailment. As
that such items would be returned on demand to the per section 148 of contract act,1872 a ‘bailment’ is the
customer/beneficiary the relationship becomes of a delivery of goods by one person to another for some
trustee and beneficiary. purpose, upon a contract that they shall, when the
• A banker becomes a trustee only under certain purpose is accomplished, be returned or otherwise
circumstances, for example, when money is deposited disposed of according to the directions of the person
for a specific purpose, till that purpose is fulfilled; the delivering them.
banker is regarded as a trustee for that money. • The person delivering the goods is called the ‘bailor’.
• Again, when a cheque is given for collection, till the The person to whom they are delivered is called the
proceeds are collected, he holds the cheque as a ‘bailee’. Such relationship exists while lending against
trustee. pledge of goods.
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Lessor and lessee Pledgor-Pledgee

• The banks provide safe deposit lockers to • A pledge occurs when goods are delivered by
the customers who hire them on lease one person to another to be held as a security
basis. The relationship, therefore, is that of for the payment of a debt or the performance of
some other obligations and upon the express or
lessor and lessee. In such case a banker implied understanding that the subject matter of
becomes the lessor and the customer the pledge is to be restored to the owner till the
becomes the lessee. debt is discharged.
• It is only the customer who has to pay rent for • Under such circumstances the borrower
the lockers. becomes the pledgor and the lending banker
becomes the pledgee.

Mortgagor-Mortgagee Special Relationship:

• A mortgage is the transfer of an interest in • Apart from general features of relationship, there
specific immovable property for the purpose of exist some special features that arise due to the
securing the payment of money advanced or to following legal obligations:
be advanced by way of loan, an existing or • Statutory obligation to honor cheque: when a
future debt or the performance of an customer opens an account there arises a
engagement which may give rise to a pecuniary contractual relationship between the banker and
liability. the customer by virtue of which the banker
• The person transferring the interest is called the undertakes an obligation to honor his customers’
mortgagor, and the person to whom the interest cheques. This obligation is a statutory obligation
is transferred is called the mortgagee. under Sec. 31 of N. I. Act, 1881.
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Garnishee Order

• However, this statutory obligation is not absolute. The statutory obligation • When a debtor fails to repay his creditor, the latter
to honor a cheque is limited in the following ways:
(creditor) may apply to the court for the issue of a
a) Properly drawing of the cheque
Garnishee Order on the banker of his debtor.
b) The availability of the money in the account of the customer
c) Proper application of the funds • By Garnishee Order, the debtor’s account with the
d) Reasonable time for collection banker stands suspended and the debtor (customer)
e) Existence of legal bar (Garnishee Order) will not be allowed to draw, though he has a credit
f) When the customer countermands payments balance.
g) Receipt of notice of customer’s death. • The creditor at whose request, the order is issued is
h) Customer’s insolvency. called ‘the judgement Creditor’, the customer is called
Overriding the obligation: When a banker overrides his /her statutory judgement debtor, and the banker (debtor of the
obligation and dishonors a cheque on reasonable ground, the banker is
justified in doing so. However, if dishonors a cheque by mistake, the bank is judgement debtor) is called Garnishee’.
liable to compensate the customer for any loss or damage caused to him.

Obligation to maintain secrecy of accounts:

Kinds of Garnishee Order • The banker is under obligation to take utmost

The Garnishee Order issued by the court is of two types namely: Order Nisi or
Preliminary Order and Order Absolute or Final Order.
care in keeping secrecy about the accounts of its
Order Nisi: Order Nisi is a preliminary order issued to the banker: to stop the customers.
payment over the customer's account. To give explanation, why, the judgement
debtors credit balance should not be used for the purpose of payment of the
• If the banker fails to maintain the secrecy, it will
judgement creditor and it is also a duty of the banker to inform the same to his be liable for any damages or adverse effect of
customer.
the customer’s reputation, credit worthiness and
Order Absolute: It is a final order issued by the court to the banker to pay the
amount in the judgement debtors account to the judgement creditor (decree holder) business.
according to the direction given by the court.
• This obligation continues even after the
Effect of Garnishee Order
After receiving garnishee order, banker is not justified in honouring the cheques of
customer has closed his account with the bank
his customer. And as such, customer cannot claim the damages for dishonour of his and even after the death of the customer.
cheque.
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The general rule about the secrecy of the 1) Disclosure under compulsion of law
customer’s accounts may be dispensed with the • By order of the court: The bank is bound to disclose
information relating to a customer’s account. In the
following circumstances: cases, where the bank is not party to the suit but is
1)Where disclosure is under compulsion of law. required to disclose information about customer’s
account.
2)Where such disclosure requires in the interest of
• Where there being inconvenience of producing ledgers
the bank and as per banking practice. and other records including vouchers, the bank may
3)Where such disclosure is in public interest. produce before the court only certified copy of the
entries made in the customer’s account as prima facie
4)Where the disclosure is made by the express or evidence in accordance with the Banker’s Book
implied consent of the customer. Evidence Act, 1891.

• The Income Tax Authorities by dint of • Disclosure under the Companies Act: For any
their power given under various sections of company matters it may require to be investigated
under Companies Act. In that case it is the duty of
Income Tax Act, may ask the banker to
the concerned officers or employees and agents of
furnish information about their customers the company including bankers to present all the
for assessment of tax purposes or any other relevant books and papers before the inspecting
information in relation to such matters. authority.
• Disclosure to police: The police officers • As per section 35 of the Banking companies
may inspect the banker’s books for Act, 1991 every banking company need to provide
a statement regarding accounts that remained
conducting an investigation.
unclaimed for a period of ten years or more.
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• Under the Bangladesh Bank Order, 1972 2) Disclosure of information as a banking practice
Bangladesh Bank collects credit information from the • Disclosure in bank’s own interest: To legally
banking companies under their control and also protect bank’s own interest they may disclose the
furnishes consolidate credit information to the banking state of customer’s account. For example, if the
companies. However, the Bangladesh bank order banker has to recover the dues from the customer
stipulates that the information shall be kept confidential. or the guarantor, it is quite justified to disclose the
information to the guarantor or the solicitor where
• Under the Foreign Exchange Regulation Act, 1947 necessary.
Bangladesh bank may inspect the books of accounts • Banker’s opinion: This is an established practice
and other documents of the Banking companies amongst the bankers that as per instruction of BB
dealing in foreign exchange business having authorized the commercial banks exchange information to
dealership. each other about the defaulting customers which is
also justified.

3) Disclosure in public interest • With the express or implied consent of the

• A banker may justifiably disclose any information customer: The customer may give instruction a
relating to its customers account when it stands as banker to disclose the state of the accounts to
a duty to the public to disclose such information. As customer’s employee or messenger or any other
for example- person acting as his /her agent. In such a case
there may have implied consent. However,
a) When a bank considers that the customer is
involved in activities prejudicial to the interest of Express consent is required to disclose the state
the country. of a lady’s account to her husband.
b) Where as per the records of the bank it reveals
that the customer is contravening the provision of
any law.
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Other Obligation of banks

 Banker to Maintain Proper Records.  Inform the customers whether the interest rate is fixed or variable;
 Banker to Follow Customer's Instructions properly.  Inform the basis and frequency on which interest payments or
 Banker to give Notice before Closing the Account. deductions are to be made;
 Bank should exercise proper care and skill in carrying out any  Explain the method used to calculate interest of each product;
business it has agreed to transact for its customer.  Disclose prominently the total amount of income that the customers
 Banks are to disclosure of Current Interest Rates Prior to signing the shall receive on the fixed deposits; and
contract with the consumers for both interest-bearing deposits  Disclose the total cost of credit with break up, if any.
and loans
 Disclosure of latest Schedule of Charges, Fee, Commission etc.
 Banks & FIs shall inform the customers of the term of the fixed
 As financial service provider Banks/FIs shall, for all charges and fees to
deposit or loan.
be levied at the time of service rendered or on request,
 Inform the customers of the charges, if any, and consequences of
premature termination of a fixed deposit or loan;  To know the customers with a schedule of charges, fees, commissions
payable for the products or services that the customers have chosen;

 Display prominently their standard fees and charges at all branches, o Banks/FIs must take written consent from their
Inform the customers of any additional charges or expenses that the


customers have to pay, such as searching fees to retrieve available customers for any value added services, such
past records etc. as, internet banking, SMS banking, ATM services
 Notice of Changes to Terms and Conditions: etc. and inform the customers of the terms and
o The terms and conditions provided by banks/FIs shall highlight to conditions along with the charges, levied for that.
a consumer the fees, charges, penalties, relevant interest rates
and any other consumer liabilities or obligations in the use of the o Prior to a person acting as a guarantor, banks/FIs
financial products or services. Banks/FIs shall ensure that a
consumer is notified reasonably before implementing any
shall in writing advise the person of the quantum
changes to the terms and conditions, fees or charges, and nature of his or her potential liabilities; and
discontinuation of services or relocation of premises of the advise the person to seek independent legal
financial services provider.
o Immediately of any changes in interest rates regarding the advice before acting as a personal guarantor.
product or service
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Right to claim incidental charges interest etc. Lien:

• Another special relationship exists between Another special feature of the relationship between
banker and customer is that the banker may the banker and the customer is the banker’s right
claim incidental charges including service of lien over such of his customer’s securities as
charges, processing charges, appraisal charges, may come into his possession in the ordinary
penal charges, handling/collection charges, course of business.
interest on loan and so on. A lien may be defined as the right to retain
property belonging to a debtor until he has
discharged a debt due to the retainer of the
property.

A particular lien confers a right to retain the goods in A banker’s lien: It must be noted that a banker’s
respect of a particular debt involved in connection with
a particular transaction. lien is generally described as an implied pledge. It
A general lien confers a right to retain goods not only means that a lien not only gives a right to retain
in respect of debts incurred in connection with a the goods but also gives a right to sell the
particular transaction but also in respect of any
general balance arising out of the general dealing securities and goods of the customer after giving a
between the two parties. reasonable notice to him.
As per Contract Act a banker has a general lien on
cash, cheques, bill of exchange and securities This right of sale is normally available only in the
deposited with him in his character of a banker for any case of pledge. That is why a banker’s lien is
money due to him as banker. Since it extends to all regarded as an implied pledge.
transactions and thus it is more extensive than that of
a particular lien.
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Set-off:

A banker, like other creditors, possesses the right Automatic Right of Set-off arises in the following
of set-off, which enables him to combine two cases:
accounts in the name of the same customer and • Death, insanity or insolvency of the customer,
adjust the debit balance in one account with the • On the insolvency of a partner or a firm or on the
credit balance in the other. winding up of a company
This right to combine two accounts is known as the • On receiving notice of assignment of a customer’s
right of set-off. credit balance,
• On receiving notice of second mortgage over the
security charged to the bank.

Relationship banking
• Bankers of Bangladesh have started recognizing
the importance of relationship banking in
• Relationship banking emphasizes on managing management of earnings.
relations among depositors, borrowers, and • Now, our banks are providing greater care to
manage their depositors and customers. Banks
regulatory bodies with an ultimate object to earn are also spending a significant amount of money
sustainable growth in banking business. It for selecting a good location for their branch,
acquiring latest technologies, designing new
enables banks to provide a cost-effective, win- products and services, offering good package for
win service to the valued customers. their employees and designing friendly interiors
for their clients.
• As competitions are growing in the banking
system of Bangladesh, customers are being well
treated by the bank officials, as they fear that
customers now have enough opportunities to
change their banks.
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Relationship Marketing

Marketing activities that are aimed at developing

• Financial services marketing in which a bank's and managing trusting and long-term relationships
customer service representative (also called with larger customers.
account officer, customer relationship
representative, personal banking officer, etc.) In relationship marketing, customer profile, buying
attempts to meet a customer's needs with a patterns, and history of contacts are maintained in
complete package of facilities. a sales database, and an account executive is
• The package may include most or all of services assigned to one or more major customers to fulfill
such as cash management, credit cards,
deposits, loans, money market investments, etc., their needs and maintain the relationship.
that may be summarized on a single bank
statement.

A Banker to remember

1. A customer is one because of whom we get 5. A customer brings us his wants to be attended
our salaries and all allowances etc. to by us for mutual benefit.
2. A customer is the most important person in 6. A customer is not a person to argue with- you
the bank, whether they serve him in person, by may win over argument but you will then lose
mail or by telephone. time.
3. A customer is not dependent on us- we are 7. A customer does us a favour by giving us his
dependent on him. business.
4. A customer is not an interruption in our 8. A customer is not an outsider- he is a part and
work- he is the purpose of it. parcel of our business.
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Customer service- A few fundamental

principles: Customer service and human relations:

• The best asset of a bank is a satisfied • Customer service, which includes service over
customer. the counter, over the telephone and through
• Business goes where it is invited and stays correspondence, is a question of human
where it is treated well. relations. Our motto therefore should be
• The one who progresses is the one who gives a ‘Service with a smile.’
little more service, a little better service.
• He profits most who serves best.

Bank’s Customer

• The customer deserves the most courteous an • Regular Customers

attentive treatment we can give him.
• Listen more than you speak; smile more than you • Casual Customers
frown. • Cross Country Customers
• Temper is luxury and a costly too; it never pays.
• Let the words ‘Thank you’, ‘ If you please’, etc. come
• Corporate Customers
from your heart and not only from your mouth. • Internet Customers
• Let courtesy, efficiency and personalized service is
ever your watchwords.
• Always remember and endeavor to live up to the
bank’s ideal: ‘The Bank with a Personal Touch’.
• Be a LEADER, not a BOSS.
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Customer services

• Standard Services legally available to a • Cross Country Services: Clients living abroad
customer include deposit and withdrawal of need very special services. These are exchange
money to and from the accounts. Giving control related matters.
loans/credit is another very important service. • Promotional Services: Imaginative and
• Ancillary Services may include carrying out dynamic bankers promote clients with ideas for
various instructions of clients for payment and futures. Banks can promote innovative
collection of funds, providing investment facility customers and create its own class of client
offer guarantees on behalf of the customer etc. instead of depending on clients from other
banks.

Expectation of Customers

Customers expect:- d) Availability of loans in times of need and speedy

decision in this respect at competitive rate of
a) Safety of money and investments, Regular interest; - Consumer credit, credit cards etc.
standard income against investment and receiving e) Personal Proximity cum intimacy with the banks
payment against account promptly at lowest cost; through contacts at personal level.
b) Courteous behavior and respectful replies to the f) As many Types of new service facilities are offered
queries however stupid the questions may be. by modern bank e.g. withdrawal though ATM,
Replies should quick and may be from any internet, computer transactions etc. customers also
distance. expect these facilities.
g) Customers do not expect that banks shall expect
c) Appreciation for being good client of long standing anything from them except return of its loans if any
and incentives; with interest and fees.
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Strategy to meet customers’ expectation

a) Simple and quick delivery of services though modern e) Deepen the relationship through regular contact, over
means; Branch points, booth, ATM internet-computer phone, fax, internet and other sale services. Customers
Banking. total need should be found out and accommodated. Explain
carefully and faithfully if bank is unable to accommodate a
b) Providing up to-date information to the clients regularly client’s request of any kind and advise him/ her the best
about the full range of facilities available from the bank and thing he/ she can do in these circumstances.
the ways to get it. For example, various deposit schemes, f) Special booth by highly skilled persons to provide
loan schemes, consumer credit facilities should be sent to consulting on various matters! Investment consulting.
the clients home and or through Internet.
g) The nearer the client the better.
c) Keep the clients informed about the rating of the bank and
position for assurance of safety security. h) Branches should be made smaller but made independent
d) Promptly give decision on prayers for loans and credit and agency.
offer the best rates.

Multi Distribution Services VS. Multi channel

Core Banking
Services.

a) Multiple Services point (Branch) may be used to • Core banking is a banking service provided by a group of
deliver complete service. This point is to be terminal networked bank branches where customers may access
point. Referee at higher level shall not be needed. their bank account and perform basic transactions from any of
Each client according to their needs would go the the member branch offices.
required channel can dispose off the request finally. • Core Banking Solution (CBS) is networking of branches,
which enables customers to operate their accounts, and
b) Multiple channel to distribute services. Example: ATMs avail banking services from any branch of
with wide arrange and networks for basic services, the Bank on CBS network, regardless of where he maintains
Corporate Service offers to serve corporation under his account. The customer is no more the customer of a
designated officers. Branch. He becomes the Bank's Customer.
c) Cost of services shall depend on the channels used. • Banking software and network technology allows a bank to
centralize its record keeping and allow access from any
location.
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CRM Introduction

• The system essentially includes deposit, loan and credit • CRM in its simplest form it is an attitude, a
processing. Among the integral core banking services are
opening new accounts, servicing loans, calculating interests, mindset, a value you place on your banking
processing deposits and withdrawals, and customer
relationship management activities. business and its relationship with its customers.
• Core banking systems are aimed at empowering existing and • It is a methodology, a way of creating and
probable customers to have a greater freedom of their
account transactions. evolving your banking institution in the
• With technological evolutions, transactions are now safer, marketplace and at the same time in the mind of
faster and less cumbersome. The fact that these transactions
can be executed remotely, from any part of the world has each individual customer.
made core banking systems a significant aspect of banking
these days.
• Core banking always brings down operational costs
considerably, ensuring lesser manpower requirement for
execution. It also enables greater accountability of the
customers.

Customer satisfaction

• CRM recognizes that each customer is an • In banking, Customer satisfaction is the

individual and has a choice. customer's perception that a banker has met his
• It looks at ways to treat customers more as expectation fully, efficiently and promptly.
individuals and to exercise their choice positively • The customer ultimately chooses a bank who
towards your bank. provides him more value for his money and with
• It also embraces many current marketing and whose product & services he is comfortable and
management methods, such as customer satisfied.
satisfaction, customer loyalty and customer
contact technology with a view to foster
personalized value.
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Factors affecting customer satisfaction

• Higher the satisfaction level, the better is the • Response from Banker
emotional and sentimental attachment to that • Banker's ability to meet commitments
brand and more intense is the relationship • Customer service
between the customer and the bank.
• Complaint handling
• The customer expects that when he makes a
request for assistance, it will be listened to and • Deposit and Credit products
the issues will be resolved as quickly as • customer friendly features
possible. • Smooth and trouble free operation
• Maintaining Relationship

Customer behavior

• Banks need to consider ways in which they • It is also important to develop new customer
might enhance trust among their customer base, strategies and focus on loyalty programs as a
perhaps by better communicating messages long-run source of income and enhanced
around ethical practices and changes in relationships.
behavior.
• Satisfaction drivers vary significantly across
banking financial institutions should be
mindful of these often marked differences
when developing new products and new
ways of providing customer service.
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Strategies to develop relationship with

customers.

• Banks must now take a good look at their • Make every customer interaction count
customer base, examine what customers want, • Follow-through on commitments and claims about
which customers they would like to retain. products or services.
• Offer benefits and product value that responds to the
• Focusing on the profitable both in terms of customer’s desires.
customers and products could gain a • Treat customers as individuals who are respected and
competitive advantage amongst the banks. valued.
• Certain customers are interested in specific • Listen to customers.
products, so banks should take this opportunity • Build a strong brand identity.
to re-examine their products and services to truly • Surround your customers with valuable information
differentiate themselves from the competition. • Business should have a website.
• Reward loyal customers.

Termination of Banker–Customer
How to make every Customer a Special Relationship:
Customer?
• S peed
1. Customer’s Request
• P ersonalise 2. Unclaimed Deposit Account
• E xceed exceptions 3. Death of customer
4. Insanity of the customer
• C ompetence 5. Insolvency of the customer
• I nformation 6. Undesirable customer
7. Attachment order issued by the income Tax
• A ttitude – ‘Can do’
authorities
• L ong-term relationship 8. On receipt of Garnishee Order
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Thank You