Roles of Bank
The relationship with the bank gets defined by the nature of the product / service availed by the customer. Some of these are described below:
Bank as Debtor:
This is the normal relationship of a person who has an account with the bank. The moment he deposits money in the account, he becomes a creditor of the bank; the bank will be his debtor for the amount lying in his account.
Once the bank has the money, it can use the money the way it chooses. The depositor cannot direct the bank to use it in any specific manner. Similarly, the depositor cannot
ask for return of the same currency notes / coins that he deposited.
Bank as Creditor:
When a customer takes a loan from the bank, he becomes the borrower. The bank will be his creditor. The terms for the loan will be as incorporated in the loan agreement executed between the parties.
Various forms of creating the security.
Bank as Bailee:
When the customer deposits valuables or documents with the bank, the bank becomes a bailee of those items. The customer is the bailer. As provided in the Indian Contract Act, 1872, the bailer is responsible to the bailee for any losses that arise on account of the bailer’s negligence.
Bank as Agent:
When a customer deposits a cheque into his account, the bank will send it for clearing. The bank, in this role, is an agent of the customer. The customer is the principal. Similarly, the bank becomes an agent when the customer leaves various standing instructions for payments with the bank.
It is the duty of the agent to follow the instructions given by the principal. The relationship terminates either when the principal gives notice of such termination, or in the event of death, insolvency or lunacy of the principal.
Bank as Lessor:
When a customer opts for a safe deposit locker with a bank, he is effectively leasing the locker. He is a lessee, the bank is the lessor. The relationship lasts so long as the lessee keeps paying the prescribed charges. The lessor is responsible for ensuring minimum standards of security to ensure the safety of the items deposited in the locker. However, it will be liable for loss only if it is negligent in any manner. It can also insist on the procedures to be followed for using the locker.
Bank as Executor / Trustee:
Banks have their Executor and Trustee department, who can be appointed for handling the estate of the customer, after the customer’s death. The person, in his Will, would mention the bank as Executor of the Will. So long as the bank has accepted the prescribed charges from the customer, it cannot refuse to act as such. While performing this role, it has to act as a trustee of the customer’s affairs, and exercise reasonable diligence and care. Companies often appoint bankers as Trustees for their debenture-holders. In such situations, the bank has a role to protect the interest of the debenture-holders. This would normally take the form of ensuring that the security is created, payments are made as promised etc. The company may appoint different trustees for different series of debentures.
