What Are The Rights Of A Banker And A Customer In A Banking Contract?

A right is a moral or a legal entitlement to have or to do something. In a banker-customer's contract, both parties have rights to a certain extent to do something or take certain decisions.

Looking at these in terms of citizens of a country, we will see that every citizen has rights as well as obligations towards his/her country which are bounded by law. As a citizen, it is your right to be educated and your duty to respect and defend your country.

In this article, you will learn about your rights as a customer or a banker in a banker-customer's contract.

When you open an account with a bank, automatically, a contract is created. Some of the right that can be manifested as follows:

What Are the Rights of a Banker in a Banking Contract?

The following rights can be exercised by the banker on his/her customer:

Banker's Right of Lien

One of the rights of a banker in a banking contract is his right of lien.

The banker's (creditor) right of lien is his right to retain goods and securities owned by the customer (debtor) under custody until the loan due from the debtor is paid.

However, a lender (banker) can only insist on a lien if the customer has not agreed to the bank's terms. The banker has the right to maintain the security of the debtor but not the right to sell them.

There are two types of lien: Particular and General lien.

1. Particular lien: A particular lien is one in which the banker can retain some goods but not all. In particular lien, the creditor does not have the right to retain all properties of the debtor; the banker can only retain goods to which the charges have arisen.
2. General lien: in general lien, the banker has the right to retain goods and securities delegated to him in his capacity as a banker until the whole balance of account is paid. This is possible only in the absence of a contract contradictory to the banker's right of lien.

However, there are some conditions under which the banker's right of lien can not be applied, which are:

• If the banker has been appointed as a trustee or agent for the goods and securities.
• If there is a contract that exists between the banker and a customer that is contradictory to the banker's right of general lien.
• The right of lien can be exercised only on goods standing in the name of the borrower and not on goods joined with other individuals.
• The right of lien cannot be applicable to documents deposited for specific purposes.

Banker's right to Set Off

Another right of a banker to his customer in a banking contract is the right to set off an account.

The banker has the right to set off the account of his customer. This enables the creditor (banker) to set off a debt owed to the bank by a debtor (customer) before they later repay the loans.

A banker can merge two accounts in the name of the same customer and set off the debt balance in one account and the credit balance in the other account.

The right of setoff can be exercised only if there is no agreement implied that is contradictory to this right. It can be exercised only after a notice has been served to the customer.

In the case of automatic right of set off, there is no need for permission from the customer before exercising this right. This can occur in the following conditions:

• In the case of dead of customer
• When the customer becomes insolvent (unable to pay debts owed).
• If a garnishee order is issued on the customer's account by the court.

Before the baker's right of set off is exercised, the following conditions must be attained:

• Funds held in trust accounts are not allowed to be set off.
• It cannot be exercised on two accounts bearing different names (owners).
• The right cannot be expressed in respect for future and contingent debts.

Banker's right to Charge Interest

If a banker gives a loan to a customer, he becomes a lender and has the right to debit the interest to the customer's account. It is an implied right for the banker to charge interest for his loans, unless there is a contract that is contradictory to this right.

Based on the type of account a customer opens with the bank, a banker has the right to charge monthly fees for the accounts.

The banker might also impose certain incidental charges if a customer fails to maintain a minimum balance with his/her account. Similarly, the banker may collect charges for issuing a statement of account. 

In addition to the above , the banker may implied to charge commission on services rendered by the bank to the customer, such as SMS notification service, retail banking, multi-city checks services, etc.

Banker's Right of Appropriation

A banker also has the right to appropriation in a banking contract.

A customer may be owing several debts to the bank when the customer deposits some money without specific instructions and is insufficient to settle/discharge all debts. The issue is determining which debt should be amended.

In the absence of any specifying instructions, the bank in the case has the right to appropriate the deposited amount to any loan, even to a time-barred debt. This is done after the banker has most likely informed the customer about the appropriation.

If a customer has more than one account or has taken more than one loan from the bank, the banker can appropriate these loans from the accounts.

Rights Of A Customer in a Banking Contract?

Even as a customer who has created an account in a bank and your account is having a credit balance, you are eligible to certain rights from your banker. Some of which we will be discussing below:

Customer's Right to Fair Treatment

The customer has the right to be treated with  courtesy. When offering and delivering financial products, customers should not be treated unfairly based on their social standing, gender, age, religion, or physical ability.

Customer's Right to Transparency, Fairness, and Honest Dealing

The banker makes every effort to ensure that the contracts or agreements it frames are transparent, easy to understand, and can be well comminuted to a common man.

The banker most ensures that the product's price, the associated risks, the terms and conditions that govern use over the product's life cycle, and the responsibilities of the customer and banker should clearly be disclosed.

Customer's Right to Suitability

The customer has the right to suitability in a banker-customer's contract. The products offered by the bank should be in accordance with the needs of the customer and also based on an assessment of the customer's financial capacity and understanding.

 Customer's Right to Privacy

The banker most ensures the confidentiality of his customer's personal information unless the customer offers specific consent to the bank or the law required for the provision of such information. Customers have the right to be protected from all kinds of communications, electronic or otherwise, that infringe upon their privacy.

Customer's Right to Grievance, redresser and compensation

The customer has the right to hold the bank accountable for the products it offers and to have a clear and easy way to have any valid grievances redressed. The banker should also help with the resolution of complaints related to the sale of third-party products.

The banker must express its policy for compensating errors, lapses in behavior, and non-performance or delays in performance, whether caused by the bank or not.

What Factors Can Lead to the Termination of a Banking Contract?

Both the banker and the customer have rights in every contract they engage in. But some factors, as we see below, can cause the termination of their contract.

1. Voluntary termination ( when one party decides to quit the contract)
2. When a customer dies (Death)
3. Bankruptcy of the bank due to lack of finance.
4. Liquidation of the company.
5. Insanity of the company.

Related post:

• What Are The Duties Of A Banker/Customer In A Banker-Customer's Contract?

Final Thought on the Rights of Customer and Banker in a Banker-Customer's Customer

A right is a moral or legal entitlement to have or to do something. In a banker-customer's contract, both parties have rights to a certain extent to do something or take certain decisions. Before getting into any contract, it is important you find out what you can do and that which you cannot do. 

This article has helped guide you in incurring any charges and also to know when your rights are being breached, either as a banker or a customer. It is also very important to know that under some legal procedures, rights can be breached by one party.