Banker and Customer Relationship Quiz

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Questions and Answers

What is the role of a banker?

A banker is a person or institution that accepts deposits from the public, makes loans, and provides other financial services. They act as a financial intermediary, managing funds, offering investment advice, and facilitating various types of transactions.

According to Macleod, who is a banker?

A dealer in debts or credit

Describe a customer's role in banking?

An individual or entity that holds an account with a bank and engages with the bank for financial services, including depositing money, withdrawing funds, taking loans, or seeking investment advice.

The relationship between the banker and the customer is based on trust and contractual obligations, and is often governed by legal principles like confidentiality, the right to receive interest on deposits, or the responsibility to repay loans.

True (A) Signup and view all the answers

What are the two types of customers in banking?

Retail Customer (A), Corporate Customer (B) Signup and view all the answers

What is meant by 'Bank as Debtor'?

When a customer deposits money in a bank, the bank becomes a debtor to the customer, as they owe the deposited amount. Signup and view all the answers

What is meant by 'Customer as Debtor'?

When a customer takes a loan from the bank, they become a debtor to the bank, obligated to repay the loan along with interest. Signup and view all the answers

Explain what is a 'Pledger'?

A customer who pledges movable assets like shares or gold as collateral for a loan, and the bank acts as the pledgee. Signup and view all the answers

What is meant by 'Licensor/Lessor'?

When the bank provides access to a safe deposit locker to the customer, the bank acts as the licensor/lessor. Signup and view all the answers

When does a bank act as a 'Trustee'?

In certain cases, the bank may act as a trustee, holding assets like bonds or securities in trust for the customer. Signup and view all the answers

What is the role of a 'Beneficiary' in banking?

The customer is the actual beneficiary of the trust, having the legal right to the assets and income managed by the bank. Signup and view all the answers

When does a bank become a 'Bailee'?

When a customer entrusts physical goods or securities to the bank for safekeeping. Signup and view all the answers

What is a 'Bailor'?

The customer is the bailor, as they hand over possession of goods or securities to the bank expecting their safe return. Signup and view all the answers

What are the circumstances where a bank acts as an 'Advisor'?

In wealth management, financial planning, or investment banking. Signup and view all the answers

When a bank acts as an 'Agent' what are they doing?

The bank acts as an agent on behalf of the customer to perform various services including bill payments, fund transfers, or buying and selling of securities. Signup and view all the answers

What is the role of the 'Principal' in banking?

The customer is the principal, directing the bank (agent) to perform specific tasks on their behalf. Signup and view all the answers

What does it mean when a bank is a 'Pawnee'?

A bank becomes the pawnee when a customer pawns movable property as security for a loan, holding the property until the loan is repaid. Signup and view all the answers

What is a 'Mortgagee'?

When a customer mortgages immovable property like a house to the bank for a loan, the bank becomes the mortgagee. Signup and view all the answers

What is meant by 'Mortgagor'?

The customer in this case who offers the immovable property as security is the mortgagor. Signup and view all the answers

What does it mean when a bank acts as 'Trader'?

Banks act as a trader when they offer various products and services like loans, deposits, or insurance for sale. Signup and view all the answers

What is the role of a 'Consumer' in banking?

The customer is the consumer, purchasing or availing of the bank's services or products. Signup and view all the answers

A banker's duty to honor cheques applies as long as there are enough funds in the customer's account, and the cheque is drawn and signed correctly by the customer.

True (A) Signup and view all the answers

A bank can legally dishonor a cheque even if sufficient funds are available, if a legal or court order prohibits the payment.

True (A) Signup and view all the answers

What are the consequences of a bank wrongfully dishonoring a cheque?

It can damage the customer's reputation and the bank may be liable for damages. Signup and view all the answers

What is a 'banker's lien'?

A bank's right to retain a customer's goods, securities, or assets in their possession until a debt owed by the customer is paid. Signup and view all the answers

What is a 'Particular Lien'?

The right to retain specific goods in the bank's possession for a particular debt or obligation. Signup and view all the answers

A banker's lien is usually explicitly stated in banking transactions.

False (B) Signup and view all the answers

Explain the banker's duty to maintain the secrecy of the customer's account details?

The bank must protect information related to the account balance, transactions, and personal details of the customer. Signup and view all the answers

What are the exceptions to the banker's duty to maintain secrecy of the customer's account?

Disclosure with Customer's Consent (A), Disclosure in Public Interest (B), Disclosure to Protect the Bank's Interest (C), Disclosure Required by Law (D) Signup and view all the answers

What is the banker's right to combine accounts?

The right of the bank to combine the balances of multiple accounts held by the customer to offset a debit balance in one account with a credit balance in another. Signup and view all the answers

The bank can combine accounts held in different rights, without the customer's consent, as long as the purpose is to offset the debit.

False (B) Signup and view all the answers

What is the purpose of combining accounts?

To recover outstanding debts by balancing the customer's credit and debit positions across multiple accounts. Signup and view all the answers

What is the banker's right to set-off?

The bank's right to adjust mutual debts with the customer, using funds from a customer's account to set off a debt owed to the bank. Signup and view all the answers

The bank must inform the customer of their intention to exercise the right of set-off, but they can do so arbitrarily without following the terms and conditions of the banking relationship.

False (B) Signup and view all the answers

What are the banker's duty to provide statements of account?

The bank must provide regular account statements detailing all transactions, debits, credits, and account balance. Signup and view all the answers

What are the benefits of the banker's duty to provide statements of account?

It helps the customer keep track of their financial activities, ensures transparency, and gives the customer an opportunity to verify transactions and raise disputes. Signup and view all the answers

What is the banker's duty to act with care and skill?

Handling the customer's financial affairs with reasonable care and skill, meeting industry standards. Signup and view all the answers

Describe the application of the banker's duty to act with care and skill?

Processing transactions accurately, safeguarding deposits, and ensuring competent financial advice or investment services. Signup and view all the answers

What is the banker's right to charge interest and fees?

The bank has the right to charge interest on loans and fees for various services, such as ATM withdrawals, overdraft protection, or account maintenance. Signup and view all the answers

The special relationship between a banker and customer is defined by a set of mutual rights and obligations.

True (A) Signup and view all the answers

What rights does a banker have in the banking relationship?

The right to combine accounts, exercise a lien, set-off debts, and charge interest or fees. Signup and view all the answers

What are the exceptions to the banker's right to lien?

Trust accounts, safe custody items, and deposits for a specific purpose. Signup and view all the answers

The bank's right to set-off is legally binding and can occur any time without notice to the customer.

False (B) Signup and view all the answers

What is the banker's right to charge compound interest, commission, and fees?

The right to charge compound interest on loans, commission for services provided, and fees for managing accounts or other services. Signup and view all the answers

The banker's right to charge compound interest and commission is unrestricted, not subject to regulatory compliance or financial regulations.

False (B) Signup and view all the answers

In a broad sense, define a customer in banking.

Any individual or entity that engages in transactions or uses financial services provided by a bank. Signup and view all the answers

What is the difference between a customer and an account holder?

An account holder has an account with the bank and owns or operates it, while a customer may engage in other financial transactions like taking a loan but may not have an account. Signup and view all the answers

What is a savings account and who uses it?

An individual who wants to earn interest on deposited funds uses a savings account. Signup and view all the answers

What is a checking account and who uses it?

An individual who needs a checking account for day-to-day transactions and payments uses it. Signup and view all the answers

What is a fixed deposit account?

An individual who places a lump sum in a fixed deposit account for a specified term to earn a higher rate of interest. Signup and view all the answers

What are the responsibilities of a joint account holder?

Managing account balances, paying overdraft fees, and complying with account terms. Signup and view all the answers

What is the difference between a 'Joint Tenant with Right of Survivorship' and 'Tenants in Common'?

In JTWROS, upon the death of one account holder, the surviving account holders automatically inherit the deceased's share, while in tenants in common, the deceased's share is distributed according to their will or legal heirs. Signup and view all the answers

Who uses a business checking account and why?

Businesses use a business checking account for day-to-day financial operations and transactions. Signup and view all the answers

Who uses a business savings account?

Businesses use business savings accounts for saving business funds and earning interest. Signup and view all the answers

Who uses a corporate fixed deposit?

Businesses use corporate fixed deposits for placing business funds in a fixed deposit account, earning interest over a specified term. Signup and view all the answers

Define a trust account holder?

An account held by a bank in the name of a trust, where the trust owns the account and the trustee manages it. Signup and view all the answers

What is a revocable trust account?

The trust can be altered or revoked by the grantor. Signup and view all the answers

What is a custodial account?

An account held by an adult (custodian) on behalf of a minor (beneficiary). Signup and view all the answers

What is a Uniform Transfers to Minors Act (UTMA) account?

Allows transfers of property to minors without the need for a formal trust. Signup and view all the answers

What is a Uniform Gift to Minors Act (UGMA) account?

Similar to UTMA, but typically limited to gifts of securities or cash. Signup and view all the answers

What is the role of the custodian in a custodial account?

The custodian manages the account and makes decisions in the best interest of the minor. Signup and view all the answers

What is the difference between a non-resident account holder and a resident account holder?

A non-resident account holder operates their account in a bank located in a country where they are not a resident. Signup and view all the answers

What is a non-resident external (NRE) account?

An account for Indian citizens residing abroad to deposit foreign earnings in India. Signup and view all the answers

What is a non-resident ordinary (NRO) account?

An account for managing income earned in India by non-resident Indians. Signup and view all the answers

What is a nominee account?

An account where the primary account holder appoints a nominee to inherit the account in case of the primary holder's death. Signup and view all the answers

What are the general procedures for opening and operating a minor's account?

A minor typically needs to be at least 10 years old, require documents like the minor's and guardian's ID and proof of address, and the guardian operates the account until the minor reaches the age of majority. Signup and view all the answers

What are the general procedures for opening and operating a joint account?

Two or more individuals can open a joint account, requiring documents including ID and address for each account holder, and transactions usually require the signatures or approvals of all account holders. Signup and view all the answers

What are the general procedures for opening and operating a partnership firm account?

Any legal partnership firm can open a bank account, requiring documents like the partnership deed, ID and address of partners, and transactions may be authorized as per the partnership deed or mandate. Signup and view all the answers

What are the general procedures for opening and operating a joint stock company account?

Public and private companies can open accounts, requiring documents like the certificate of incorporation, memorandum and articles of association, board resolution authorizing the account with signatories, and transactions are conducted based on the board resolution and company's policies. Signup and view all the answers

What are the general procedures for opening and operating a club or association account?

Clubs, societies, and associations can open accounts, requiring documents like registration certificate, proof of existence, resolution from the governing body, and transactions must follow the resolution or governing rules. Signup and view all the answers

What are the general procedures for opening and operating a non-resident account?

Non-resident accounts are for Indians residing outside India, requiring documents like proof of NRI status, overseas address, and transactions must adhere to foreign exchange regulations and reporting requirements. Signup and view all the answers

Flashcards

Who is a banker?

A person or institution that manages money for the public, makes loans, and provides financial services. They act as a financial intermediary, managing funds and offering investment advice.

Who is a customer of a bank?

An individual or entity that utilizes a bank's services, such as deposits, withdrawals, loans, or seeking investment advice.

What is the banker's obligation to honour cheques?

Bankers are obligated to honor customer cheques, provided sufficient funds exist in the account, and the cheque is properly drawn and signed.

What is the banker's lien?

The bank's right to hold customer assets (goods, securities) until a debt owed by the customer is repaid.