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F-209: Law and Practice of Banking
Shift in Business Focus
Gone are the days when borrowing was criticized and objected to and
the borrower was looked down upon.
Right from small businessman, up to the biggest business tycoon, they
invariably depend upon finances of different types given by the banks.
There has been a shift from a transactions to relationship focus in
every business. First act is to attract customers and second act is to
retain customers.
A shift to a relationship strategy often represents changes in mindset,
organizational culture, and employee reward system.
Banking Company and Banker
Earlier View
According to Banking Companies Act 1991, "banking company" means
any company transacting the business of banking in Bangladesh, and
includes all new banks and special banks;

According to Negotiable Instruments Act 1881, the term banker

includes a person or a corporation or a company acting as a banker.
Banking Company and Banker
Experts View
According to Sir John Paget, No person or body corporate or otherwise
can be a banker who does not take deposit accounts, take current
accounts, issue and pay cheques and collect cheques crossed and
uncrossed for his customers.
One claiming to be banker must profess himself to be a-
o full time banker
o the public must accept him as baker
o his main business will be banking from which he earns living
Earlier Stage View
A person who has an account in a bank is considered its customer.

Second Stage View

To constitute a customer, there must be some recognizable course or habit of
dealing in the nature of regular banking business.

Modern View
Single transaction
Neither the number of transactions nor the period during which business has been
conducted between the parties is material in determining whether or not a person is a
Thus, in order to constitute a person as a customer, he must satisfy the following
1. He must have an account with the bank i.e., saving bank account, current deposit
account, or fixed deposit account.
2. The transactions between the banker and the customer should be of banking nature i.e.,
a person who approaches the banker for operating Safe Deposit Locker or purchasing
travelers cheques is not a customer of the bank since such transactions do not come under
the orbit of banking transactions.
3. Frequency of transactions is not quite necessary though anticipated.
Types of Customer
Regular Customer
Casual Customer
Cross-Country Customer
Corporate Customer
Internet Customer
Deposits account holder
Purchaser of DD, TT, PO
Bill Payer
Tasks of the Banker
Know your Customer (KYC)
Well behaved, ever smiling
Attentive for satisfying customer
Use of courteous language
Avoid expressions of anger
Keep contact with the customer
To be mentor of the client
Send success stories
Seek advice of the client
Consider your client as development partner
Do customers always purchase
the best product?

Educate your customer

Banker Customer Relationship
The relationship between the banker and the customer arises out of
the contract entered in between them.
This contractual relationship between banker and customer is
regulated by the rules contained in the Negotiable Instruments Act,
1881 and the Indian Contract Act, 1872. Any dispute can be settled on
the basis of nature of existing relationship between them.
The relationship starts right from the moment an account is opened
and it comes to an end immediately on closure of the account.
Banker Customer Relationship
Nature of Relationship
o Behavioral
o Legal
Categories of Relationship
o General
o Special
Banker Customer Relationship
Debtor-Creditor Relationship
Bailor-Bailee Relationship (Safe custody of deposits)
Lessor-Lessee Relationship (Safe deposit locker)
Trustee- Beneficiary Relationship
Agent-Principal Relationship