Lecture Retail and merchant banking – Lecture 26

Lecture 26 - Banker and customer. The role of a banker is one filled with multiple duties and responsibilities. There are different types of bankers and each one is unique in his own way. Some of these individuals work for large corporate conglomerates while others work for small town financial institutions.

Revise Lecture 26

Lecture 26

Customer

Banker and Customer

The Banker

• The role of a banker is one filled with

multiple duties and responsibilities

• There are different types of bankers and each one is unique in his own way

• Some of these individuals work for large corporate conglomerates while others

work for small town financial institutions

Banker and Customer

• The duties concerning saving, loans,

taxes, investment and securities are all

within the job realm of a banker

Banker and Customer

• The Banker

He will provide financial assistance to the client in accordance with their needs

Banker and Customer

• The Customer

Banker and Customer

The Customer

• In banking, a customer is someone who makes use of or receive the services of

the bank

• The word customer historically derives

‘custom’ meaning habbit, so a customer was someone who frequented a particular shop, who made it a habbit to purchase

goods there

Banker and Customer

Duties of a Customer

All banks carry out the customer’s

instructions in a business-like manner

In return, the customer has special duties of cooperation and other duties of care

A customer is bound to the following;

Banker and Customer

Banker and Customer

• Duties of a Customer

4 Use of forms

5 Express notification of any special instruction

6 Notification of time limits and dates

7 Complaints to be made immediately

8 Checking of confirmation of the bank

9 Liability arising from neglect of duty

Banker and Customer

• Banker’s obligation to protect

customer secrecy

Banker and Customer

• The obligation of a banker to observe

secrecy relating to affairs of his customers

is an implied term of the contract between

a banker and his customer

• A banker would not divulge to third

persons, without the consent of the

customer, express or implied, either the

state of the customer’s account or any of his transactions with the bank

Banker and Customer

interest and commission

Banker and Customer

Banker’s right to charge interest and

commission

• The bank generates its profits from the

differential between the level of interest it pays for deposits and other sources of

funds, and the level of interest it charges

in its lending activities

• All banks at any time and form time to time are entitled to charge the rate of interest

on loan either by express agreement or

right of custom or usage of trade

Banker and Customer

Banker’s right to charge interest and

commission

• They also entitled to charge compound

interest and commission for services

rendered to the customer

• In the absence of an express agreement

or without due notice, a bank is not

allowed to debit charges at any date other than the customary dates

• Banker’s Right to Lien

Banker and Customer

Banker’s Right to Lien

• A lien is the right of a creditor in

possession of goods, securities or any

other assets belonging to the debtor to

retain them until the debt is repaid,

provided that there is no contract express

or implied, to the contrary

Banker and Customer

Banker’s Right to Lien

• Lien is, in its primary sense, a right in one man to retain that which is in his

possession belonging to another until

certain demands of the person in

possession are satisfied

• In its primary sense, it is given by law and not by contract

Banker and Customer

Banker’s Right to Lien

• A banker’s lien on negotiable securities

has been judicially defined as ‘ an implied pledge’

• A banker has, in the absence of

agreement to the contrary, a lien on all

bills received from a customer in the

ordinary course of banking business in

respect of any balance that may be due from such customer

• Banker’s right of set-off

Banker and Customer

Banker’s right of set-off

• The of right of set-off is also known as the right of combination of accounts

• A bank has a right to set-off a debt owing

to a customer against a debt due from

him

• ‘A legal set-off is where there are mutual

debts between the plaintiff and the

defendant, or if either party sue or be sued

as executor or administrator, one debt may

be set against the other’

Banker and Customer

Banker’s right of set-off

• From a commercial standpoint, a right of set-off is a form of security (right) for a

lender

• It is an attractive security because its

realization does not involve the sale of an asset to a third party

• A set-off must be in the form of a cross

claim for a liquidated amount, and it can

be pleaded only in respect of a liquidated claim

• Deposit Account

Banker and Customer

Deposit Account

• The main banking activities consist of

acceptance of deposit from the public for the purpose of lending to businessmen

and others who may seek loans

• Actually, the money deposited in any bank

is mostly the saving of the people

• Money may be needed in future for

various purposes such as medical

treatment, marriages and for other events

Banker and Customer

Deposit Account

• So people keep their savings with

someone where it will both be safe and

earn a return

• A bank is a such place where money once deposited remains safe and also earns

profit

• Types of deposit account

Banker and Customer

Types of deposit account

• Bank deposits serve different purposes for different people

• Some people cannot save regularly, they deposit money in the bank only when they have extra income

• Some, mostly businessmen, deposit all

their income from sales in a bank account and pay all business expenses out of the deposits

Banker and Customer

Types of deposit account

• Keeping in view these differences, banks offer the people the facility of opening

different types of deposit accounts to suit their purpose and convenience

Types of deposit account

• Accordingly, bank deposit accounts may

be classified as;

1. Savings bank account

2. Current deposit account

3. Fixed deposit account

4. Recurring deposit account

5. Salary account

• Withdrawal from deposit account

Banker and Customer

Withdrawal from deposit account

• Customer deposit his savings for use in

future

• The need for money may arise any time

So customer should know how to get back your money from the bank

Banker and Customer

Withdrawal from deposit account

Money can be withdrawn by using;

1. Withdrawal form

2. Cheque

3. ATM card

Lecture 27

Types of Accounts Holders

• Banks are custodians of public money

• Basically, the money is accepted as

deposit for safe keeping

• A bank account is a monetary account with

a banking institution recording the balance

of money for a customer

Types of Accounts Holders

• Opening an account is the most common and the first service of the banking sector

• There are different types of bank accounts

in the Pakistan banking sector;

1. Bank savings account

2. Bank current account

3. Bank term deposits account

4. Bank online account

Types of Accounts Holders

• While opening an account, the banker

should provide the customer with details of various types of accounts that he may

open with the bank

• The customer can have his choice on

what type of account would best suit him, based on his needs and requirements

Types of Accounts Holders

• The banker should, prior to opening an

account, require documentation and

information as prescribed by the Know

Your Customer (KYC) guidelines issued by SBP and such other norms or procedures adopted by the bank

Types of Accounts Holders

• The due diligence process that the banker should follow will involve providing

documentation verifying the customer’s

identity, address, and information on his

occupation or business and source of

funds

• A part of the due diligence process, the

bank may also require an introduction from

a person acceptable to the banker if they

so deem necessary, and may need the

customer’s recent photographs

Types of Accounts Holders

• The bank reserves the right, at its sole discretion, to open any account and, at such terms, as the bank may prescribe from time to time

• A bank has to deal with different types of account holders which are the following;

Types of Accounts Holders

Types of Accounts Holders

9 Joint stock company

10 Clubs, Associations and Societies

11 Trusts

12 Government departments

13 Local authorities

Types of Accounts Holders

Types of Accounts Holders

Payment of Pension

• Banks make pension payments on behalf

of the government to the retired

employees of Central and State

Governments, Defence services, Railways and others

• All prnsion payments are subject to rules and procedures prescribed by the

government, SBP and concerned

departments / organizations from time to time

Types of Accounts Holders

Payment of Pension

• A pensioner can open an account with cheque book facility and also give

nomination in his pension account

• Once the account is opened, no credit other than pension is permitted in the

account

• Pension accounts are allowed 50%

concession in minimum balance

requirements as well as in service

charges

Types of Accounts Holders

re-intimate the fact promptly to the paying branch is required

pension-Types of Accounts Holders

Payment of Pension

• The pension usually credited by the

branch to the pensioner’s saving or

current account during the last four

working days of the month

• Income tax at the prescribed rate is

deducted from the pension amount, and net amount is payable to the pensioner’s account