Unit Three

Special Types of Customers

Minors lunatics Illiterate persons Married women Agent Bankrupts Joint Hindu family Drunkard

Partnership firm

Joint stock company

Local authorities Clubs/associations

Trustees Joint account Non-Trading Organizations

Minors
A minor is a person who has not completed the age of 18 years Indian contract act declares a minor as incompetent to enter into any contract The banker should be very careful with minors as money lent to a minor can not be recovered

Special privileges enjoyed by a Minor

A contract entered into by a minor is void & is not enforceable A minor cannot be compelled to repay the loan unless it is for the necessaries of life A guarantee given by a minor is invalid Money lent to a minor cannot be recovered The minor has the right to get back the securities pledged with the bank even without repaying the loan A minor can be a partner in a partnership firm but is not liable for the debts of the firm

Precautions
A banker should open a minors account in the name of his guardian A minor can be held liable for the loans given to him for his necessaries of life & is recoverable from his properties The banker should induce the guarantor as a principal debtor

Lunatics
They are persons of unsound mind They are disqualified from entering into a contract

Precautions
First of all the banker should confirm whether the applicant is a lunatic or not If the banker knows that the applicant is a lunatic the banker has to avoid such a customer If the existing customer becomes insane the banker should get an official proof of his insanity As soon as he gets the official confirmation the banker should stop paying his orders

Illiterate persons
Is one who cannot sign his name, cannot read or write or understand the texts He may not be able to operate the account by his own He cannot be given cheque book facility

precautions
A banker should get his left hand thumb impression in the presence of 2 persons known to the bank for identification in the application The banker should explain the nature of account conditions for operation of the account etc In case he opens a joint account with a literate person ,cheque book may be provided but only the literate person can operate the account

Married women
Can open an account in her name She can enter into a contract

PARDANASHIN WOMAN
Is one who is secluded from others by wearing a pardah or a veil on her face No stranger can open an account in favour of a pardanashin woman when an account is to be opened for her all the facts pertaining to the account have to be explained to her It is preferable to have a witness who is well known to the pardanashin woman

Agents
Is a person who acts on behalf of anther person He can open an account & this account is considered as the personal account of an agent If an agent acts on behalf of the principal by power of attorney the banker should examine the documents & the powers

Bankrupt
Banker should not open an account in the name of an undischarged bankrupt If the existing customer becomes bankrupt the banker should stop all operations of the account

Drunkards
When a customer having an account with the bank comes in an intoxicated condition the banker should not make payment

Partnership firm
Details of the firm name & addresses of partners ,partnership firm & its registered office While granting loan the bank should insist all the partners to sign the promissory note

 The liability of the partners are joint & several so the banker must know the details of the properties held by the partners On the death or insolvency of any partner the bank must close the account of the firm& open afresh account in the name of the surviving partners

 The account of the firm can be closed on the order of the court when a creditor sues the firm In case of retirement of a partner he should give due notice of the debts to the bank & also to the firm

Joint stock company

an account can be opened only after its registration The banker must obtain the following documents Copy of certificate of incorporation Memorandum of association Copy of common seal Borrowing powers of the company

 Persons who are authorised to endorse cheque on behalf of the company Resolution of the board authorising a particular director to operate the bank account

Joint hindu family

When a hindu family inheriting ancestral property conducts a firm or business out of the property for the benefit of all the family members its called a joint hindu family

 The eldest member of the family is called the karta & tboth male & female has equal right in the property are called the coparceners

 The banker must know clearly the full details of the members of the family The account must be opened with the signatures of the karta & all the adult members of the family While granting loan the bank must verify the signature of the karta & the adult members

Trust account
Its an agreement between two parties one is called the trustee & the other is called the beneficiary The bank should have a copy of the trust deed Rights & duties of the trustees Borrwing powers of the trustees Duration of the trustees & the trust Value of the trust property

Clubs /associations
The banker must insist on the registration of the club or associations When they are registered they get a legal identity Resolutions with regard to the elections of office bearers must be handed over to the bank

Importance of customer relationship

Marketing of banking services such as consumer loan ,housing loan , education loan, Promoting modern technology such as ebanking,internet banking,telebanking Better training facilities for the bank employees in tonning up inter personal relationship will improve customer relationship

 Better training facilities for the bank employees in tonning up inter personal relationship will improve customer relationship

 In-house keeping : no more counter service & should be more of cabin discussions Whenever a customer approaches with problems connected with loan or withdrawal of money the bank should solve the problem instantaneously

Customer Grievances& RedressalOmbudsman

An Ombudsman is one who protects people from the exploitation of bigger powers & arranges for redressal of the grievance

Setting up of ombudsman
In public interest Reserve bank of india has setup banking ombudsman for taking action against banks for guilty of exploitation Negligence deficiency in service concerning loans & advances

 The banking ombudsman will be a person of high standing in legal , banking,financialservices His office will be located at places specified by the RBI

objects
Main object of this scheme isto settle complaints received from the customers & to settle claims made by customers in case of loss suffered by them to negligence of banks

 Non payment of cheques Delay in making payment of cheques drafts bills Non acceptance of smaller denomination Notes Non adhering to the working hours of the branches Complaints with regard to unauthorised or fradulent withdrawals

Procedure for grievances

As soon as the complaint is received the banking ombudsman shall send a notice to the concerned branch to call for an explanation Proper enquiry will be conducted by the banking ombudsman as per the procedure laid down in the scheme

 If the branch is found guilty the banking ombudsman will give its award which is binding on the bank If the concerned bank is not complying with be taken against the bank

customer
To be a customer the person should have some sort of an account with the banker He should have had a few transactions with the bank

General relationship between banker & customer

Debtors & creditor relationship Trustee & beneficiary Lessor & lessee Principal & agent

Debtor creditor
When a banker recieves deposit from a customer the banker becomes a debtor & the customer the creditor The banker is considered as a creditor when the customer borrows from the bank or when a customer enjoys overdraft

trustee - beneficiary
When a customer deposits securities & valuables for safe custody with the banker ,the banker is a trustee. The banker is also a trustee whenever he undertakes to collect cheques given for collection

Agent - principal
A banker acts as an agent of a customer when he performs certain functions as per the instructions of the customer Purchasing & selling securities on behalf of the customer Paying rent, insurance premium as per the instructions of the customer

Lessor - Lessee
In the case of safe deposit locker facilities offered by banks the relation between a banker & the customer is that of lessor & lessee The banker is the lesser & the customer is the lessee

Rights
To charge reasonable interest on loans To have a general lien over the customers securities

Duties
Duty to honour customers cheque prime duty the bank has to dishonour if amount & words differ If signature is not according to specimen signature Postdated stale cheque mutilatedcheque

Wrongful dishonour of cheques

Negligence on the part of the banker Faulty computation of the balance in the customers account Failure to credit deposits made by the customer Failure to send cheques bills for collection

Obligation to maintain secrecy of customers account

The financial dealings between the banker & the customers account is confidential Revealing the facts of the customers account to others may lead to financial loss as well as loss of reputation to the customers If the customer suffers any loss on account of unwarranted disclosure of his account the banker will be compelled to compensate for the loss suffered by the customer

Disclosure under compulsion of law

Under income tax act,1961 Under companies act ,1956 Under banking regulation act Under criminal procedure code Under RBI Act ,1934 Under garnishee order

Disclosure in the interest of the public

A bank may have large number & variety of customers A few accounts may attract deposits from anti-social When the banker has a proof he can reveal this to the respective authorities

 Disclosure of the account of an enemy in times of war Disclosure of an account for an unlawful association

Disclosure in the interest of the bank

When the banker finds difficult to collect the loan from his customer he may take the matter to the court for settlement When a fellow banker makes an enquiry the banker has to exchange information about the customers account

General precautions
Information should not be conveyed over the telephone While sending information to the customer through an agent it should be put in a closed cover preferably sealed Information should be given only after getting the express consent of the customer in writing Information furnished by the banker must not be more or less

Distinction between particular lien & general lien

Particular lien is given only for a particular product A banker enjoys a general lien he has a right in respect of a general balance due to him

Right of set off

The mutual adjustment of debit & credit balances is called set-off A banker has the automatic right of set off in the following cases On the death,insolvency & insanity of the customer

Right of appropriation
When money is deposited with a bank as a general as a general rule the debtor makes payment to his creditor shall have the right to say for which account he is making payment

Right to claim incidental charges

While collecting an outstation cheque or foreign cheque When the banker spends some money while doing agency services for the customer postal charges telephone charges

Importance of customer relations

Increasing purchases Free advertising through the word of mouth

Meaning of customer relationship management

Helps to understand & influence customer behavior through meaningful communications in order to improve customer acquisition loyalty & profitability