Professional Documents
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Relationship Between Banker and Customer
Relationship Between Banker and Customer
The term banking may define as accepting of deposit of money from the
public for the purpose of lending or investing investment of that money which
are repayable on demand or otherwise and with draw by cheque, draft or
order.
Features of Banking
1. The definition of banking describes the following features of banking.
A banking company must perform both of the essential functions.
Accepting of deposit.
2. Lending or investing the same: The phrase deposit of money from the
public is significant. The bankers accept deposit of money and not of
anything else. The world public implies that a banker accept deposit from
anyone who offers his/her money from such purpose.
3. The definition also implies the time and made of withdraw of the deposit.
The deposit money should be repayable to the depositor on demand made
by the letter or according to the agreement reached between the two
parties.
Customer
A person who has a bank account in his name and for whom the banker
undertakes to provide the facilities as a banker is considered to be a
customer.
To constitute a customer the following requirements must be fulfilled;
The relationship between banker and Customer are categorized into three;
1. Relationship as debtor and creditor.
2. Banker as a trustee.
3. Banker as an agent.
Pledge
Bailment of goods as security for payment of a debt or performance of a
promise. The person who offers the security is called the pawnor or pledger
and the bailee is called the pawnee or the pledgee.
Delivery of goods from one person to another for some purpose upon the
contract that the goods will be returned back when the purpose is
accomplished or otherwise disposed of according to the instructions of the
bailor.
From the above definitions we observe that,
Essentials of Pledge
Delivery of goods: Delivery of goods is essential to complete a pledge. The
delivery may be physical or symbolic. Physical delivery refers to physical
transfer of goods from a pledger to the pledgee.
Symbolic delivery requires no actual delivery of goods. But the possession of
goods must be transferred to a pledgee. This may be done in any one of the
following ways:
Delivery of the key of the warehouse in which the goods are stored.
Delivery of the document of title to goods like bill of lading, railway receipt,
warehouse warrants etc.
Delivery of transferable warehouse warrant if the goods are kept in a public
warehouse.
Transfer of ownership: The ownership of goods remains with the pledger.
The possession of the goods vests with pledgee till the loan is repaid.
Right in case of failure to repay: If the pledger fails to repay within the
stipulated time, pledgee may,
When the pledgee decides to exercise the right of sale, he must issue a clear,
specific, and reasonable notice.
Rights of a banker as a Pledgee
1. The pledgee has the right to retain the goods pledged until he is paid the
debt along with the interest thereon and all other necessary expenses
incurred for the possession and preservation of the goods.
2. The pledgee has the right to retain the goods pledged only for the particular
debt and not for any other debt, unless the contract provides otherwise.
3. The pledgee is entitled to receive from the pledger extraordinary expenses
incurred by him for the preservation of the goods pledged.
4. If the pledger makes a default in payment, the following courses are open
to the pledgee:
He may file a suit for the recovery of the amount.
He may sue for the sale of the goods.
He may himself sell the goods after giving reasonable notice.
5. If the proceeds of such sale are less than the amount due in respect of the
debt or performance, the pledger is still liable to pay the balance. If the
proceeds of the sale are greater than the amount so due, the pledgee shall
pay over the surplus to the pledger.
6. If a third person wrongfully deprives the pledgee of the use or the
possession of the goods pledged, he has the remedies against the third
person as the owner would have had. The pledgee may file a suit for
damages.
7. If the pledgee suffers any damage as a result of non-disclosure of any fault
by the pledger, the hitter is responsible for it.
8. If the pledgee suffers loss, when the title of the pledger to the goods
pledged is defective the pledger shall be responsible.
Hypothecation
The mortgage of movable property for securing loan is called hypothecation.
In other words, in case of hypothecation, a charge over movable properties
like goods, raw materials, goods-in-process is created.
Hart defines hypothecation as a charge against property for an amount where
neither ownership nor possession is passed to the creditor.
According to Hart when goods are made available as security for a debt
without transferring the possession of property to the lender, the transaction is
a hypothecation.
The goods remain with the borrower and under a hypothecation agreement he
or she undertakes to transfer the possession whenever required to do so.
Hypothecation facility is also called open loan facility. Hypothecation is a
convenient method of borrowing for some concerns.
For instance, a manufacturing concern cannot pledge its raw materials which
are required for production every day. By hypothecating them, the company
can continue the production and also avail the credit facility.
Being only an equitable charge on movable property without possession,
hypothecation facility is risky as clean advances. So it is granted only to
parties if undoubted means with the highest integrity.
As goods under hypothecation remain in the possession of the borrower, extra
care has to be exercised to see that the banks security is complete,
adequate, safe, and available at times when required.
Assignment
Assignment means transfer of any existing or future right, property, or debt by
one person to another person. The person who assigns the property is called
assignor and the person to whom it is transferred is called assignee.
Usually assignments are made of actionable claims such as book debts,
insurance claims etc. In banking business, a borrower may assign to the
banker;
(i) the book debts,
(ii) money due from government department,
(iii) insurance policies.
Assignments may be of two types: