Introduction
We only hear about the ideal concepts like ‘Customer is the King’, ‘Customer’s Delight’ etc. everywhere but no one talks about the duties and responsibilities of a bank customer. The Banking and Finance Institutions Act 1989 (BAFIA 1989) does not provide any definition about the customer. However, a customer of the bank can be
defined as the one who has an account with the bank with the condition where the relationship between them is one which duration is the essence. The definition can be justified in some cases, for instance: Ladbroke v. Todd (1994).
Ladbroke v. Todd – In this case, the plaintiff had drawn a cheque and sent it to the payee by post. The letter was stolen and the thief took it to the defendant, who is a banker, and used it to open an account. In doing so, he forged the payee’s endorsement. The defendant believed him to be the payee because he was not introduced to the bank and no references were obtained. The defendant opened the account and the cheque was specially cleared at the request of the thief, and he drew out the proceeds the very next day. When the plaintiff discovered the fraud, he brought an action against the defendant for conversion. The question raised was whether the account having been opened by payment in all the cheques to be collected, the defendant could be properly regarded as having received payment for a customer.
Since the account was already opened when the cheque was collected, a payment for a customer was received. The drawer thereupon sent another cheque to the real payee and took an assignment of his rights in the stolen cheque and as holders of the cheque or as assignees brought an action against the bank to recover the proceeds collected by the bank as money and received to their use. Evidence had been given that it was the general practice of bankers to obtain a satisfactory introduction or reference. The banker had acted in good faith but was guilty of negligence in failing to take reasonable precautions to safeguard the interests of the true owner of the cheque, and thus had placed himself outside the protection of Section 82 of the 1882 Act. The banker would are entitled to the protection of the section as having received payment for a customer, but had lost it due to his want of ordinary care. The relation of banker and customer began as soon as the first cheque was handed to the banker for collection, and not when it was paid.
Duties of Customer
To exercise reasonable care in drawing cheque - In absence of express agreement to the contrary, customer’s duty is limited to refrain from drafting a cheque in such a manner as to facilitate fraud or forgery. Customer must take care of the fraudulent alterations of cheques which might result in the loss of the banker. Thus, the customers have to exercise due care in drawing cheques to prevent any fraud from taking place.
Court Case: Grindlays Bank International Limited v. Nahar Investments Limited The banker, Grindlays Bank International Limited, is the respondent who was sued by Nahar Investments Limited. The respondent’s employee, Daya overdrew money from respondents account with the appellant. Daya withdrew a sum of total K 5,000 for her use and she has committed fraud by taking all this money from the Bank of Zambia. The respondents suit the appellant for recovering the sum of K 5,000 plus the interest. The result approved the overdraft since the company belonged to the non-Zambians and the exchange control regulation required such approval. The High Court found that the appellant had been negligent in allowing a fraudulent employee of the respondent to overdraw on the latter’s account resulting in a loss which must be borne by the appellant.
To disclose forgery
Customer has to disclose to the bank any forgery immediately upon his discovery of such forgery to enable the bank to take adequate precautions against future loss. A customer owes no wider duty of care to the bank in the overall management and operation of the bank account.
Court Case: Tai Hing Cotton Mill Ltd v. Liu Chong Hing Bank.
This Company has a current account in the bank and approximately 33 cheques were withdrawn from the bank with the total amount of HK $ 5.5 million. The money drawn is bear with the signature of Mr Chen who is the managing director of the company and who is the authorized signatories to its cheques. The cheques are debited to the company’s current account but indeed the cheques were not signed by Mr Chen instead they were forged by an account clerk, Leung Wing Ling. Therefore, the customer has to disclose the forgery to the banker so it can enable the banker to take adequate precautions against future loss. Leung Wing Ling, the accounting clerk opened an account in the real suppliers’ name and persuaded Mr Chen to sign cheques for them by submitting forged documents as proof of transactions to him.
The duties and responsibilities of a bank customer
A customer must always remember some things. They are as follows:-
1) The foremost duty of a customer is to comply with the KYC norms that have now become universal. KYC – which stands for Know Your Customer may be a process followed by a financial organization or an entity to gather the small print to determine the identity of a client. It was introduced by the Reserve Bank of India (RBI) to prevent financial frauds like money laundering, identity theft and illegal transactions.
2) The customer must cooperate with the bank by following all the rules and regulations, without asking for an exemption.
3) The customer must remember his/her bank account number. The account number is synonymous with his/her name, for all practical purposes because he/she is identified more by the account number than anything else in the bank.
4) The customer must remember to sign the same each time and his/her signature must always match with the specimen signature scanned and uploaded in the bank’s computers. However, the customer is entitled to change his/her specimen signature once in a few years.
5) The customer has to bring his/her Passbook and also Cheque book whenever he/she visits the bank in person. It will save the time of the banker as well as himself/herself.
6) When the customer visits the bank for completing some unfinished job for the second time, the customer should carry all the relevant papers and documents in a full set, without fail.
7) The customers who enjoy Cheque book facility must not ask for a withdrawal form or a loose cheque because in the CBS environment it will be difficult to oblige them, especially when they want cash withdrawal. CBS which stands for Core Banking Solution may be a banking industry that helps customers to access their funds and other transactions from any of the member branches, no matter where he/she maintains his/her account.
8) The customer must remember of his bank’s business hours and shall not unnecessarily trouble the banker to suits his requests outside the business hours; this is often because the customers, upon their requests, are provided with Debit Card and Internet Banking Facility which is free of cost, almost by all the banks. Therefore, a customer can meet most of his/her financial needs by these facilities even when the bank is closed.
9) The customer is expected to know the distinction between the ‘Home Branch’ and other branches of the same bank because there are certain functions that can only be carried out at the ‘Home Branch’. For instance, insurance of a new Cheque book or a Debit card, account closure, change of address etc. In case of a non-Home Branch, several restrictions exist for payment of cash to a third party, limits are imposed on withdrawal of cash by oneself, sending RTGS (Real
Time Gross Settlement) or payment of taxes etc. The customer must find out the nature of restrictions from the Home Branch and always remember them.
10) The customer is expected to behave decently and politely when he/she is inside a bank or when he/she contacts the bank over phone or email. The customer must behave properly especially when he/she contacts the bank over the phone. The customer must be very specific on his/her query and end the conversation within a few minutes because the banker has several restrictions in prolonging the conversation unnecessarily. If necessary, the customer must visit the branch in-person to satisfy his/her needs, as all the needs cannot be fulfilled through a phone call or an email.
11) For withdrawal of large sums of cash, premature cancellation of a term deposit of huge value, issuance of TDS certificate etc. advance intimation to the bank is necessary. TDS as in Tax Deducted at Source is one of the tax-collecting method used in India. It is governed under the Indian tax Act 1961 and managed by Central Board of Direct Taxes (CBDT). The customer must approach the right person that is the banker, for attending to his/her particular need. He/she shall not expect all the bank staff to perform all the kind of job at a time. Similarly, the customer must approach the right branch/office for his/her special needs.
12) The customer is predicted to know that the bank is merely there to fulfil genuine banking needs and thus, the bank cannot act as his/her finance manager or accountant. For some special needs like investment and tax counselling, the customer must approach his/her auditor or the other competent professional only.
13) One of the most important things that a customer has to remember is that he/she cannot expect the bank to offer a solution to the problems faced by him/her elsewhere.
14) Whenever there is an acute shortage of staff in the bank due to the absence of many staff at a time, on the grounds of leave, transfer, training etc., the customer must cooperate with the staff present and learn to adjust without showing impatience, irritation and anger on them.
15) The customer shall not attempt to skip the queue while many other customers are waiting for the same reason, such as withdrawal, cash payment, tax remittance etc.
16) The customer shall not demand any privilege or concession or service to which he is not entitled, as per the bank rules. However, the customer may seek clarification from the banker regarding his/her disqualification in this regard.
17) Once the director has given his oral approval for any credit proposal, the customer must submit all the required papers and documents, neatly sorted and arrange without submitting them in piecemeal. In this way, a lot of time will be saved and it will also obviate dissatisfaction and complaints.
18) Having accepted all the terms and conditions of sanction of a loan or advance, the customer must sincerely and honourable comply with them in time.
19) Finally, the customer must realize that the banker is also a human being and they have their limitations. Therefore, the customer must treat the banker as his/her equal and in doing so the customer will get spontaneous respect from all of them.
Conclusion
Doing this assignment I have come to a better comprehension that, a banking person is a person or entity that maintains an account or has business relationships with the bank and the duties of the customer towards his banker is not only to present the cheque and negotiable instruments during the business hours of the bank but in case of any disagreement within the statement, customers should inform the bank. Whenever photographs of customers are required by the bank it is the responsibility of the customer to give them. The customer must present the instrument of credit within the due time from the date of issue. The cheque should be carefully filled by customers. If the cheque book is lost or stolen, the customer has to inform the bank. If the customer notices any forgery in the amount of cheque, he/she should inform it to the bank immediately. Customers should clear all the dues on the particular time. The customers have to read the MITC which stands for Most Important Terms and Conditions. It is related to banking products or services. MITC mostly contains all the information and rules that we need to know about a product or service offered by a bank.
Anugraha Sundas
Jogesh Chandra Chaudhuri Law College, Calcutta University
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