Page 175 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes 10.5.1 Rights and Liabilities of Paying and Collecting Banker

Rights and liabilities of a both types of bankers can be discussed as follows:

Rights of Paying and Collecting Banker

The rights of the banker include:
1. Right of General Lien: can be retained till the owner discharges the debt or obligation to
the possessor. 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. A banker has the right to retain the
property belonging to the customer until the debt due from him has been paid. It is a right
to retain possession of specific goods or securities or other movables of which the
ownership vests in some other person and the possession
2. Right to set off: The right of set off is also known as the right of combination of accounts.
Right to set off is a right of the banker to adjust his outstanding Joan (debit) in the name of
the customer from his credit balance of any of the accounts he s maintaining with the bank.
A bank has a right to set off a debt owing to a customer against a debt due from him. Right
to set off is nothing but combine the two or more accounts of a customer of the customer.
If the customer have two or more account and in case of absence of agreement the banker
can exercise has right of set off:

(a) The two or more accounts must be in the name of same customer
(b) There must be same capacity
(c) There must be same bank ,though different branches
(d) One account should show debit balance and other should show a credit balance
(e) The debt must be manual

(f) The amount of debit should be certain one.
Thus set off is adjustment of debit balance with that of credit balance
3. Right to close an account: There should be no confusion between closing the account and
stopping operation of the account. The contractual relationship between banker and
customer is terminated by closing the account. There is no opportunity for the customer to
operate the account once again. On the other hand, stopping operation of an account refers
to the suspension of the operation of an account for the time being, at the advent of certain
events. It is purely suspension of the relationship between a banker and a customer and
the customer can operate the account, after such events come to a close
The circumstances for closure of account are:

(a) Customer’s intension to close the account
i. The customer can close the account in any of the following condition
ii. If he does not agree to the terms of the banker such as rate of interest, bank
charges etc
iii. If the customer does not enjoy such facilities as are offered by some other
banks e.g. free transfer of money up to ` 10000

iv. When the confidence of the person is shaken

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