The relationship between a banker and a customer is primarily a contractual relationship. It begins as soon as an account is opened. This relationship is not just one single type; it changes depending on the transaction.
The Primary Relationship: Debtor and Creditor
This is the main relationship between a banker and a customer. Interestingly, the roles can reverse.
1. When a Customer Deposits Money
- The customer is the Creditor (lender). They have lent their money to the bank.
- The bank is the Debtor (borrower). The bank owes this money to the customer and must repay it on demand.
2. When a Bank Lends Money (Loan or Advance)
- The bank is the Creditor (lender). It has lent money to the customer.
- The customer is the Debtor (borrower). They owe this money to the bank and must repay it.
Special or Subsidiary Relationships
Apart from the primary relationship, several other special relationships are formed based on the specific services a bank provides.
| Service Provided by the Bank | Banker’s Role | Customer’s Role | Simple Example |
| You pledge your gold jewellery to the bank to get a loan. The bank holds the jewelry as security. | Bailee (One who takes temporary possession of goods) | Bailor (One who gives the goods) | You give your property documents to the bank for safekeeping. The bank must keep them safe and return them to you. |
| Collecting Cheques / Paying Bills on behalf of the customer | Agent (One who acts on behalf of another) | Principal (One on whose behalf the agent acts) | You deposit a cheque into your account. The bank acts as your agent to collect the money from the other bank. |
| Pledge of an Asset for a Loan (e.g., gold loan) | Pledgee / Pawnee (One who receives the pledge) | Pledgor / Pawnor (One who gives the pledge) | You pledge your gold jewellery to the bank to get a loan. The bank holds the jewellery as security. |
| Customer leaves money for a specific purpose (e.g., for a trust) | Trustee (Holds assets for the benefit of another) | Beneficiary (The one who benefits from the trust) | An NRI sends money to a bank with specific instructions to pay it to their parents every month. The bank acts as a trustee. |
| Standing Instructions to make regular payments (e.g., insurance premiums) | Agent | Principal | You instruct your bank to pay your insurance premium of ₹5,000 every month from your account. |
Key Obligations of a Banker
There are two main duties a banker has towards a customer:
- Obligation to Honour Cheques: A bank is legally bound to pay cheques drawn by the customer, provided there are sufficient funds in the account and the cheque is properly drawn.
- Obligation to Maintain Secrecy of Accounts: A bank must not disclose any information about the customer’s account to a third party. However, there are exceptions, such as when required by law (e.g., for income tax authorities) or with the customer’s consent.
Understanding these different “hats” that a bank and a customer wear is essential for answering questions on this topic.