Yudfjk JKHH

Principles of Banking
& Currency
Banker-Customer
Relationship
By. Prof Riaz Ahmed Mian

Types of Bank
Customers
Types of Bank Customers
1. Individual Customer
2. Joint Customer
3. Married Woman
4. Minor
5. Person of Unsound Mind

6. (cont’d..)
Prof. Riaz Ahmed Mian, HCBF, University of the Punjab
1
Types of Bank Customers
6. Parda Nasheen Woman
7. Partnership Firm
8. Joint Stock Company
9. Trustee
Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 2

Banker-Customer
Relationship
Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

3
Banker
 In simple words banker denotes a
bank. He is the person who represents bank
in front of client and customer. Following
are definitions of banker.
According to English Bill of Exchange

Act 1882:
 “A banker is any businessman who is
carrying on the business of banking.”
4
Banker – cont’d
According to G. Crowther:
 “A banker is a dealer in debt of his own
and other people.”
According to Banking Companies

Ordinance 1962:
 “Banking means the “accepting for the
purpose of lending or investment of
deposits of money from the public
repayable on demand or otherwise and
withdrawn by cheque, draft, order or
otherwise.” 5
Customer
 The word customer has not been
defined in English or Pakistan’s law. In
simple words a customer is such a person
to whom you extend your services in return
of consideration.

Customer – cont’d
According to an English Court (1910):

 “There must be some sort of account
either a deposit or a current account in
some similar relation to make a man
customer of a banker.”
7
Nature of Relationship
Between Banker and Customer
According to John Paget :
 “The relation of a banker and a customer
is primarily that of debtor and creditor the
respective position been determined by the
existing state of the account.

General Relationships
 Debtor and Creditor

Special Relationships
1. Principal and Agent

2. Pawner and Pawnee
3. A pawner is a person who pledges
the goods. A pawnee is a person to
whom goods are pledged.

Special Relationships – cont’d
3. Bailor and Bailee

Bailment means delivery of goods by one
person to another for some purpose
upon a contract. When a customers
places his valuable with the bank for
safe custody he becomes bailor and
the bank becomes bailee.
4. Mortgagor and Mortgagee

5. Banker as Executor, Trustee, Attorney

6. Assignor and Assignee
7. When any property or obligation is
assigned to the bank then the bank
becomes assignee and client becomes
assignor.
8. 7. Consultant

8. Guarantor and Principal Debtor

Guarantor is the person who gives the
guarantee. Principal debtor is the
person for whom the guarantee is
given.
9. Financier and Financee

10. Indemnifier and Indemnity Holder
Indemnity is a contract where one party
promises to save the other party from
the loss caused to him by the conduct
of the promisor himself or by the
conduct of any other person. The
person who promises to make good the
lose is called indemnifier and
promisee is called indemnity holder.
(cont’d..)

Indemnifier and Indemnity Holder - cont’d
So by this logic when bank makes a

contract of indemnity with the client,
bank becomes indemnifier and client
becomes indemnity holder.
11. Reference and Feferee

Rights and Duties of
Banker and Customers

Rights of Banker
1. Right to Lien
2. Right of Set-off:
According to the Institute of Banker of
London (1924).
“So long as the accounts a active, banker
cannot set off the debit balance of
one account against the credit balance
of another except after a reasonable
notice given to the customer”.
3. Right to charge for their Services
17
Duties of a Banker
1. To Honour Cheques of Customers
2. Duty of Secrecy:
In 1924, it was held in a court (Tournier vs.
National Provincial and Union Bank of
England) that
“Banker must not disclosed the conditions
of his customer’s account, except on
reasonable and proper occasion and
the obligation to observe secrecy does
not end even with the closing of the
account.” 18
(cont’d)
Duties of a Banker
Duty of Secrecy- cont’d
 Requirement of Law
 National Interest
 Suit against customers
 Express or Implied Agreement with
Customer
19
Duties of a Banker
3. Execution of Standing Orders
4. Garnishee Order :
“A Garnishee order is an order issued by a
court to a judgement creditor to attach
the funds in the hands of the third
person who owes money to the
judgement debtor. The Garnishee
warns third person called “Garnishee”
against releasing the money attached
until directed by the court to do so”.
(cont’d..) 20
Duties of a Banker
Garnishee Order – cont’d
So when a Garnishee order is declared by

court in respect of a customer, it is a
banker’s duty to stop operation of his
account.
5. Safe Custody
21
Rights of Customers
1. To Draw Cheque
2. To Receive Pass Book / Statement of
Account
3. To Sue Bank for Wrong Dishonour
4. To Sue Bank for Disclosing Secret
Information
21-A
Duties of Customers
1. Within Business Hours
2. Within a Reasonable Time
3. Custody of Cheque-book
4. Careful Filling of Cheques
22
Termination of Contract
between
Banker and Customer
23
(a). Termination by Customer
1. Change of place
2. Poor Services
3. Death of a Customer
24
(b). Termination by Banker
1. Presenting cheques after usual
banking hours.
2. Drawing cheques, knowing that he has
not got sufficient funds in his account.
3. If a customer keeps a very small
amount in his account which may be
deemed un-remunerative by the
banker.
4. (cont’d..)
25
Termination by Banker – cont’d
 In all the above mentioned cases, the

banker can give notice to the customer
requesting him to change his attitude.
However on the following grounds, he
can close the account of customer:
1. No Response to Notice.
2. Death of a Customer
3. Insanity of the Customer
4. (cont’d..)
26
Termination by Banker – cont’d
4. Insolvency of the Customer

5. Garnishee Orders
6. Assignment of Account
7. Change in Constitution of a Firm or
Company
27
thank U
Best of Luck

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Principles of Banking

By. Prof Riaz Ahmed Mian

5. Person of Unsound Mind

8. Joint Stock Company

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 2

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab

According to English Bill of Exchange

According to Banking Companies

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 6

According to an English Court (1910):

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 8

 Debtor and Creditor

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 9

1. Principal and Agent

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 10

3. Bailor and Bailee

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 11

5. Banker as Executor, Trustee, Attorney

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 12

8. Guarantor and Principal Debtor

9. Financier and Financee

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 13

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 14

Indemnifier and Indemnity Holder - cont’d

So by this logic when bank makes a

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 15

Prof. Riaz Ahmed Mian, HCBF, University of the Punjab 16

So when a Garnishee order is declared by

 In all the above mentioned cases, the

4. Insolvency of the Customer

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