What is the Relationship between a Banker and his Customer?

Relationship between a banker and a customer may be:

Contractual relationship:

Due to the contract between the two, this relationship is said to be the primary one that exists between bankers and customer. The contract is formed the moment customer opens an account with a bank. Till the time customer operates his account according to terms and conditions agreed between them, this contract remains valid and true.

Debtor and creditor relationship:

Banker and customer have a relation of debtor and creditor. Banker is said to be a debtor and customer a creditor, as soon as the account is opened by the customer with a bank and credit balance is maintained. Money deposited by the customer becomes a debt due from bank to its customer. Banker can make use of deposited money in any way as per his choice but he has to repay the debt whenever the customer demands it.

Bailee and Bailor relationship:

Bank acts as a bailee, as it does not accept money from customer on a promise that money will not be utilized and that identical money will be returned. Safe deposit lockers are also prompted by banks. Documents and valuables are accepted by banker with a view to provide safe custody. Bank acts as a bailee and the relationship is that of bailee and bailer.

Trustee Beneficiary relationship:

Banks act as trustees and executors of will of customers. The job of the trustee is to take care of property and money or hold it and make use of the trust money as per the trust deed and even use it in order to provide benefit to other person called beneficiary.

If customer deposit money with bank and lay down specific instructions regarding its use, bank cannot use the money for any other purpose other than the specified purpose told by the customer because banker acts as the trustee of money of the customer. In this case, money that is held by the banker is under trust and is different from money received as deposits.

Principal Agent relationship:

Many functions are performed by banks like collection of cheques or drafts or bills, payment of insurance premiums, arranging for remittances etc. according to the customer’s instructions. Bank acts as an agent of the customer while performing the above mentioned functions. In all these cases, customer’s position is that of the principal whereas banker’s position is that of the agent.