Meaning and Definition of Banker and Customer
1. Banker – Meaning & Definition
A banker is a financial institution or an individual engaged in the business of accepting deposits,
lending money, and providing banking services like withdrawals, fund transfers, and
investments.
Definition:
According to the Banking Regulation Act, 1949,
"A banking company is a company that transacts the business of banking, which means
accepting deposits from the public, repayable on demand or otherwise, and lending or investing
such deposits."
In simple words: A banker stores money safely, gives loans, and provides financial services like
ATM, online banking, and cheques.
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2. Customer – Meaning & Definition
A customer is a person or business that has an account with a bank and regularly uses its
services.
Definition by Sir John Paget:
"To become a customer, there must be a habitual or continuous relationship between the person
and the bank."
In simple words: A customer is anyone who has an account in the bank and uses its services
regularly. A person who just visits a bank once does not become a customer.
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Banker-Customer Relationship
When a person opens an account in a bank, the banker and customer relationship begins.
The banker acts as a debtor (when holding deposits) and creditor (when giving loans).
The relationship depends on trust, legal contracts, and financial transactions.
This relationship gives both the banker and customer certain rights and duties, ensuring smooth
banking operations.
Relationship between banker and customer
Transaction Bank Customer Examples
Deposit in the bank Debtor Creditor A person deposits ₹10,000 in their
SBI savings account. The bank
can use this money for lending but
must return it when the customer
withdraws.
Loan from Bank Creditor Debtor A person takes a ₹5 lakh personal
loan from HDFC Bank. Now, the
bank is the creditor, and the
person must repay it with interest.
Safe custody Bailee Bailor A jeweler stores gold in an ICICI
Bank locker. The bank keeps it
safe but does not own the gold.
Locker Lessor Lessee A businessman rents a locker in
Axis Bank for ₹3,000 per year to
store important documents.
Collection of Agent Principal A person authorizes ICICI Bank to
cheque pay their electricity bill
automatically every month.
Purchase of Draft Debtor Creditor HDFC Bank manages mutual
funds on behalf of investors,
ensuring their money is invested
properly.
Payee of a Draft Trustee Beneficiary An investor asks Kotak Bank for
advice on stock market
investments.
Pledge Pawner Pawnee A farmer pledges gold jewelry at a
(Pledgee) (Pledger) Punjab National Bank branch to
get an agricultural loan.
Mortgage Mortgagee Mortgagor A person loses their fixed deposit
receipt and provides an indemnity
bond to SBI for a duplicate one.
Standing Agent Principal A customer can instruct a banker
instruction to pay his bills,interest
etc…automatically from his
account.
Articles left by Trustee Beneficiary If a customer mistakenly leave
mistake their articles in the locker the bank
takes responsibility to return the
article ,if the customer has proper
evidence
Hypothecation Hypothecatee Hypothecator If a person takes loan for a vehicle
(Auto) from bank ,the person can
make use of the vehicle but the
ownership will be held with the
bank untill the loan amount was
repaid with interest.
Indemnity Indemnified Indemnifier if a person lost his Demand Draft
and asks for a duplicate DD,the
bank makes an indemnity bond,in
which the customer is required to
bare the loss of bank if both
original a d duplicate DD were
presented in bank.
Special relationship between banker and customer
The special relationship between a banker and a customer arises when a person opens an
account with a bank. This relationship is based on contract, trust, and statutory obligations,
giving both parties certain rights and duties.
1. Relationship as Debtor and Creditor
When a customer deposits money, the bank becomes the debtor, and the customer is the
creditor.
The bank is liable to return the money on demand or as per the agreed terms.
If the customer takes a loan, the roles reverse, and the customer becomes the debtor while the
bank is the creditor.
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2. Rights and Duties of the Banker
Rights of the Banker
1. Right to Lien – The bank can retain the customer’s security or assets until repayment of dues.
2. Right to Set-off – The bank can adjust a customer’s credit balance against any debt owed.
3. Right to Charge Interest & Commission – The bank has the right to charge interest on loans
and fees for services.
4. Right to Close the Account – The bank can close an account if the customer violates banking
norms or due to inactivity.
5. Right to Appropriate Payments – The bank can decide how to apply payments if the customer
has multiple loans.
Duties of the Banker
1. Duty to Honor Cheques – The bank must honor cheques issued by the customer if funds are
available.
2. Duty to Maintain Secrecy – The bank must keep customer account details confidential
(except under legal obligations).
3. Duty to Follow Instructions – The bank must follow the customer’s written instructions unless
they are illegal or impractical.
4. Duty to Provide Statements – The bank must provide account statements periodically.
5. Duty to Exercise Due Care – The bank must act with care in handling the customer’s
transactions.
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3. Rights and Duties of the Customer
Rights of the Customer
1. Right to Deposit & Withdraw – The customer can deposit and withdraw money as per the
account terms.
2. Right to Receive Services – The customer has the right to avail banking services like loans,
ATM facilities, and online banking.
3. Right to Secrecy – The bank should not disclose customer information without consent
(except under legal obligation).
4. Right to Compensation – If the bank wrongfully dishonors a cheque or commits an error, the
customer can seek compensation.
5. Right to Close the Account – The customer can close the account by giving proper notice.
Duties of the Customer
1. Duty to Maintain Sufficient Balance – The customer must maintain a minimum balance to
avoid cheque dishonor.
2. Duty to Provide Correct Information – The customer must provide accurate details while
opening an account.
3. Duty to Use Cheques Carefully – The customer must ensure the safety of cheques to prevent
fraud.
4. Duty to Repay Loans – If a customer takes a loan, they must repay it as per the agreed
terms.
5. Duty to Report Unauthorized Transactions – The customer must inform the bank immediately
if any fraudulent activity occurs.
DIFFERENT TYPES OF BANK ACCOUNT
1. Savings Account – For Regular Savings
Like a piggy bank, but in a bank!
Helps you save money while earning a small interest.
You can deposit and withdraw money, but withdrawals may be limited.
Example: A student or a salaried person who wants to save money safely.
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2. Current Account – For Businesses
Designed for businesses and professionals who need frequent transactions.
Like a wallet with no limits – deposit and withdraw anytime, as much as needed.
No interest is given on the balance.
Example: A shop owner who needs daily cash transactions.
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3. Fixed Deposit (FD) – Lock Your Money & Earn More
You deposit a lump sum for a fixed period (7 days to 10 years).
You cannot withdraw before maturity without a penalty.
Interest rates are higher than a savings account.
Example: Someone with extra money who wants safe and guaranteed returns.
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4. Recurring Deposit (RD) – Save Monthly, Grow Your Money
Like an FD, but instead of one-time deposit, you deposit every month.
Helps in building savings habit with good returns.
Interest rate is higher than a savings account.
Example: A student saving ₹1000 every month for a future gadget.
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5. Salary Account – For Employees
Opened by companies for employees to receive salaries.
No minimum balance required.
If salary is not credited for a few months, it converts into a savings account.
Example: An IT employee gets salary directly into this account.
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6. NRI Accounts – For Indians Living Abroad
NRE Account – For depositing foreign earnings; money can be taken back abroad.
NRO Account – For managing money earned in India; withdrawals allowed in India only.
FCNR Account – Fixed deposit in foreign currency to avoid exchange rate risks.
Example: An Indian working in the US sends money to his NRE account in India.
Opening a New Bank Account – Step-by-Step Process
If you want to open a new bank account, follow these simple steps:
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1. Choose the Type of Account
Decide which account suits your needs:
Savings Account – For personal savings.
Current Account – For businesses and frequent transactions.
Fixed Deposit (FD) Account – To earn higher interest on a lump sum deposit.
Recurring Deposit (RD) Account – To save a fixed amount every month.
NRI Account – If you live abroad but need an Indian account.
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2. Visit the Bank or Apply Online
You can either visit the bank branch or apply online (many banks offer digital account opening).
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3. Fill Out the Application Form
Provide personal details like name, address, date of birth, and occupation.
Select the type of account and features (ATM card, internet banking, etc.).
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4. Submit Required Documents (KYC - Know Your Customer)
The bank requires certain documents to verify your identity:
✅ Proof of Identity (Any one)
Aadhaar Card
Passport
Voter ID
PAN Card
Driving License
✅ Proof of Address (Any one)
Aadhaar Card
Electricity/Water Bill
Rental Agreement
Bank Passbook with Address
✅ Other Documents (if applicable)
PAN Card (For tax-related purposes).
Passport-size Photos (Usually 2-3).
Business Proof (For current accounts, like GST certificate).
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5. Initial Deposit
Some accounts require a minimum deposit (e.g., ₹500 for a savings account).
Fixed deposits need a lump sum amount as per bank rules.
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6. Verification and Account Activation
The bank will verify your documents.
Once approved, you get:
Passbook
Cheque Book (if requested)
ATM/Debit Card
Internet Banking Login (if opted)
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7. Start Using Your Account
You can now deposit money, withdraw, transfer funds, and access banking services like UPI, net
banking, or mobile banking.
This process is simple and usually takes a few hours to a couple of days, depending on the
bank's procedures.
SPECIAL TYPES OF CUSTOMERS IN BANKING
1. Minors (Children Below 18 Years)
📜 Act: Indian Contract Act, 1872
A minor cannot enter into a contract, so a guardian operates the account.
Banks offer minor savings accounts with limited transactions.
Encourages children to develop saving habits.
✅ Benefits:
Zero balance accounts.
Automatic fund transfers from parents.
Higher interest rates on long-term deposits.
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2. Illiterate Persons
📜 Act: Banking Regulation Act, 1949
Since illiterate customers cannot sign, banks must use thumb impressions.
A bank official must read and explain transactions before approval.
✅ Benefits:
Biometric authentication (fingerprint-based banking).
Assisted banking services.
Voice-guided ATMs for better accessibility.
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3. Senior Citizens (Above 60 Years)
📜 Act: Senior Citizens Act, 2007
Protects elderly customers’ financial rights and ensures banking convenience.
✅ Benefits:
Higher interest rates on fixed deposits.
Priority service at bank branches.
Automatic pension credit without visiting the bank.
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4. Differently Abled Persons
📜 Act: Rights of Persons with Disabilities Act, 2016
Ensures accessibility for differently-abled customers in banking services.
RBI mandates barrier-free banking.
✅ Benefits:
Wheelchair-friendly branches.
Braille statements & voice-enabled ATMs.
Doorstep banking services.
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5. High Net-Worth Individuals (HNWIs)
📜 Act: Income Tax Act, 1961 & Banking Regulation Act, 1949
Governs large deposits, investments, and financial services for wealthy individuals.
✅ Benefits:
Dedicated relationship managers.
Priority banking & exclusive investment options.
Higher withdrawal and transaction limits.
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6. Non-Resident Indians (NRIs)
📜 Act: Foreign Exchange Management Act (FEMA), 1999
Regulates NRI accounts and international money transfers.
✅ Benefits:
Tax-free interest on NRE accounts.
Easy money transfer from foreign countries.
Forex services & global banking support.
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7. Government & Corporate Accounts
📜 Act: Companies Act, 2013 & Banking Regulation Act, 1949
Ensures secure transactions and compliance for large businesses.
✅ Benefits:
Bulk salary payments & treasury management.
Corporate loans & business banking services.
Custom financial solutions for companies.
Disclosure of Accounts in Banking
1. What is Disclosure of Accounts?
Banks must share financial details like profits, losses, loans, and risks with the public,
regulators, and investors.
It helps maintain trust, transparency, and accountability in the financial system.
2. Why is Disclosure Important?
Prevents fraud (e.g., Yes Bank crisis in 2020).
Protects customers' money by ensuring banks are financially stable.
Helps RBI monitor banks to avoid financial collapses.
3. What Information Do Banks Disclose?
Financial Statements – Balance Sheet, Profit & Loss Account.
Non-Performing Assets (NPAs) – Bad loans that customers don’t repay.
Capital Strength – Money banks have to handle risks.
Risk Policies – How banks manage economic downturns.
4. Acts Governing Disclosure in India
Banking Regulation Act, 1949 (Section 29 & 31) – Banks must publish annual reports.
Companies Act, 2013 (Section 129 & 134) – Banks must prepare financial statements.
Reserve Bank of India (RBI) Guidelines – Banks must follow RBI’s disclosure rules.
SEBI (LODR) Regulations, 2015 – Listed banks must disclose financial details quarterly.
5. Challenges in Disclosure
Balancing transparency and privacy of customers.
Handling large amounts of financial data.
Changing banking laws and regulations.
