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August 21, 2014

Banking Awareness - Meaning of Customer

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Friends, in our previous post we have discussed about the definition of Banker. In this post we shall see the meaning of the Customer. The establishment of relationship between banker and customer is very essential in Banking Law. Unfortunately, there is no definition of customer till today under any Statue in India. It is easier to recognize a customer than to define the term customer.

The legal decisions throw some light on the meaning of the term 'customer'. In Great Western Railway Company v. London and County Banking Company (1909), a customer was defined as "a person who has some sort of an account, either deposit or current account, or some similar relation with a banker".

Lord Dunedin (UK) (1920) stated "the word customer signifies a relationship in which duration is not of the essence.... A person whose money has been accepted by the bank on the footing that the bank undertakes to honor cheques upto the amount standing to his credit, is, in the view of their Lordships, a customer of the bank in the sense of the statue irrespective of whether his connection is of long or short standing".

Under the India law also, the relation must be of banking nature. (Central Bank of India v. V. V. Gopinath Nair (1970, the Kerala High Court). Thus. even a single transaction may constitute a customer. Frequency of transactions is not essential to constitute a person as a customer but the transactions are likely to become frequent. The dealings must be of banking nature. If the person goes to a bank in order to pay electricity bill or telephone bill or to deposit valuables for safe custody or to obtain change for a thousand rupee note, he cannot become a customer of the bank because the transactions are not of banking nature. They relate to casual services rendered by banks.

It is essential that the dealing must be of banking nature. The person may open a current account or savings bank account in-order to become a customer.

If any dispute arises between a banker and customer, it can be settled only on the basis of the nature of relationship that is existing between them. Hence, it is very much essential to understand the exact nature of relationship that is existing between a banker and a customer. The relationship between a banker and a customer can broadly be classified in two categories. They are,
  1. The general relationship between a banker and a customer, and
  2. The special relationship between a banker and a customer
We shall discuss in detail about these relationships in our next post. Happy Reading :) 

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