Banker Customer Relationship: Nature, Type - General and Special.

Presented by: Sk. Nazibul Islam Faculty Member, BIBM

 A banker or a bank is a person or a company carrying on the business of receiving moneys, and collecting drafts, for customers subject to the obligation of honouring cheques drawn upon them from time to time by the customers to the extent of the amounts available on their current accounts- Dr. H.L Hart.

According to Sir John Pagets Law of Banking 10th ed., p.124), there is no exhaustive definition of Bank at Common Law. However, the usual characteristics are: 1. The conduct of accounts; 2. Payment of cheques drawn on bankers; 3. The collection of cheques for customers. These characteristics are not equivalent to a definition, and these are also not the only characteristics.

BANKER:
A banker performs multifarious functions. A banker essentially be a man of wisdom. He deals with others money but with his own faculties. A banker is not only acting as a depository, agent, but also as a repository of financial advices. To be a banker, companys main functions will have to be business of banking.

Banking

Receiving deposits. Lending or investing these deposits. Repaying these deposits on demand by cheque or otherwise.

 The term Customer also presents some difficulty in the matter of definition. According to Sir John Paget, to constitute a customer there must be some recognizable course or habit of dealing in the nature of regular banking business.

CUSTOMER
Mere opening of an account will constitute a person a customer of a bank. The word customer signifies a relationship in which duration is not of essence. Even a single transaction may constitute him as a customer. Frequency of transactions is anticipated but not insisted upon. The dealings must be of a banking nature.

Relationship between Customer and Bank

Relationship between banks and their clients is fiduciary one. It is based on trust and bank has to carry out their duties to the customer in utmost good faith and due diligence. Banks supreme responsibility lies in protecting customers deposit and secrecy about customers. Banks shall be impartial and non-discriminatory in their dealings with the customers. Any favour or indulgence to any one client or group of client will be considered violation of fiduciary relationship.

General Relationship:
Debtor and Creditor: When a banker receives deposits from a customer, he is technically said to borrow money from the customer. So, he is acting as a debtor who is bound to return the money on demand to his creditor namely his customer. But in the cases of a loan, cash credit and overdraft, the banker becomes a creditor and the customer assumes the role of a debtor.

The banker as a privileged debtor to that of an ordinary commercial debtor:

a) The customer must come to the banker and make an express demand in writing for repayment of the money. b) Demand by the creditor must be made only at the particular branch where the account is kept, if there is no on line facilities. c) Demand for repayment should be made only during the specified banking hours of businesses, which are statutorily laid down.

d) An ordinary debtor may or may not honor the demand. But a banker must honor customers demand against valid cheques.
e) The banker is able to get the deposit money without giving any security to the customer while it is hardly possible in case of an ordinary debtor.

Principal and Agent:

When the banker collects cheques, bills, dividend warrants, pays insurance premium, subscriptions etc. on behalf of his customer then the agent principal relationship exists between a banker and his customer.

Trustee and Beneficiary:

A banker becomes a trustee only under certain circumstances, for example, when a cheque is given for collection, till the proceeds are collected, he holds the cheque as a trustee.

Bailor and Bailee:

A banker becomes a bailee when he receives gold ornaments and important documents for safe custody. A banker does not allow any interest on these articles.

Lessor and lessee

A banker becomes a lessor when he allows a safe deposit locker. It is only the customer who has to pay rent for the lockers.

Special Relationship:

Statutory obligation to honor cheque: when a customer opens an account there arises a contractual relationship between the banker and the customer by virtue of which the banker undertakes an obligation to honor his customers cheques. This obligation is a statutory obligation under N. I. Law.

Limited Obligation:
There are some circumstances where the banker must refuse payment of the cheques if otherwise as under: a) When the customer countermands payments b) On receipt of garnishee order c) Receipt of notice of customers death. d) Customers insolvency. e) Breach of trust f) Defective title of the party etc.

Obligation to maintain secrecy of accounts:

This obligation continues even after the customer has closed his account with the bank and even after the death of the customer. Exceptions are a) Legal Binding (under compulsion of law)
i) The Income Tax Act. ii) Companies Act iii) Bankers Book of Evidence Act iv) Banking regulation Act v) Foreign Exchange Act vi) Bank Company Act b) Consent of the customer

c) Bankers own interest d) In the interest of the public.

Bankers Lien:
Another special feature of the relationship between the banker and the customer is the bankers right of lien over such of his customers securities as may come into his possession in the ordinary course of business. A lien may be defined as the right to retain property belonging to a debtor until he has discharged a debt due to the retainer of the property.

As a banker has certain obligations to the customer, he also has certain rights. The main rights of a banker in the banker-customer relationship are:
Right to claim incidental charges interest etc.: Another special relationship exists between banker and customer is that the banker may claim incidental charges including service charges, processing charges, appraisal charges, penal charges, handling/collection charges, interest on loan and so on.

 A distinction may be made between a general lien and a particular lien. A particular lien confers a right to retain the goods in respect of a particular debt involved in connection with a particular transaction. A general lien confers a right to retain goods not only in respect of debts incurred in connection with a particular transaction but also in respect of any general balance arising out of the general dealing between the two parties. As per Contract Act a banker has a general lien on cash, cheques, bill of exchange and securities deposited with him in his character of a banker for any money due to him as banker. Since it extends to all transactions and thus it is more extensive than that of a particular lien.

 A bankers lien: It must be noted that a bankers lien is generally described as an implied pledge. It means that a lien not only gives a right to retain the goods but also gives a right to sell the securities and goods of the customer after giving a reasonable notice to him. This right of sale is normally available only in the case of pledge. That is why a bankers lien is regarded as an implied pledge.

 Right of Set-off: A banker, like other creditors, possesses the right of set-off, which enables him to combine two accounts in the name of the same customer and adjust the debit balance in one account with the credit balance in the other. This right to combine two accounts is known as the right of set-off.

Definition of 'Relationship Banking' A strategy used by banks to enhance their profitability. They accomplish this by cross-selling financial products and services to strengthen their relationships with customers and increase customer loyalty. Relationship banking involves offering customers a broad array of financial products and services that go beyond simple checking and savings accounts.

 Relationship banking emphasizes on managing relations among depositors, borrowers, and regulatory bodies with an ultimate object to earn sustainable growth in banking business. It enables banks to provide a cost-effective, win-win service to the valued customers.

 Bankers of Bangladesh have started recognizing the importance of relationship banking in management of earnings. Now, our banks are providing greater care to manage their depositors and customers. Banks are also spending a significant amount of money for selecting a good location for their branch, acquiring latest technologies, designing new products and services, offering good package for their employees and designing friendly interiors for their clients. As competitions are growing in the banking system of Bangladesh, customers are being well treated by the bank officials, as they fear that customers now have enough opportunities to change their banks.

 Financial services marketing in which a bank's customer service representative (also called account officer, customer relationship representative, personal banking officer, etc.) attempts to meet a customer's needs with a complete package of facilities. The package may include most or all of services such as cash management, credit cards, deposits, loans, money market investments, etc., that may be summarized on a single bank statement.

Relationship manager
An employment position with the main responsibility of improving the relationship between an organization and its clients using methods such as efficient communication means and implementing measures to improve customer services provided. Other roles include managing disputes raised by customers and conflict resolution between customer and company.

Relationship marketing
Marketing activities that are aimed at developing and managing trusting and long-term relationships with larger customers. In relationship marketing, customer profile, buying patterns, and history of contacts are maintained in a sales database, and an account executive is assigned to one or more major customers to fulfill their needs and maintain the relationship.

A Banker to remember
1. A customer is one because of whom we get our salaries and all allowances etc. 2. A customer is the most important person in the bank, whether they serve him in person, by mail or by telephone. 3. A customer is not dependent on us- we are dependent on him. 4. A customer is not an interruption in our work- he is the purpose of it.

5. A customer brings us his wants to be attended to by us for mutual benefit. 6. A customer is not a person to argue with- you may win over argument but you will then lose time. 7. A customer does us a favour by giving us his business. 8. A customer is not an outsider- he is a part and parcel of our business.

Customer service- A few fundamental principles:

The best asset of a bank is a satisfied customer. Business goes where it is invited and stays where it is treated well. The one who progresses is the one who gives a little more service, a little better service. He profits most who serves best.

Customer service and human relations:

Customer service, which includes service over the counter, over the telephone and through correspondence, is a question of human relations. Our motto therefore should be Service with a smile.

The customer deserves the most courteous an attentive treatment we can give him. Listen more than you speak; smile more than you frown. Temper is luxury and a costly too; it never pays. Let the words Thank you, If you please, etc. come from your heart and not only from your mouth. Let courtesy, efficiency and personalized service is ever your watchwords. Always remember and endeavour to live up to to the banks ideal: The Bank with a Personal Touch.
Be a LEADER, not a BOSS.

Customer may be Regular Customers of banks are either its depositor and or the borrowers. Both however need to become first account holder to start relationship. The sample relationship begin with opening of account with a deposit which get deepened as time passes and relations develop in various ways. Generally there are two most important customers one is depositors and the other is borrowers.

 Casual Customers are those who buys services from the bank from time to time or on regular basis e.g. buy Draft, TT, purchase Prize Bonds, Saving certificate, sell or buy Travelers cheque and payout against debt, credit cards etc. Cross Country Customer Non-resident clients, Remitters of money from abroad and investors in home country. Bank profitably act as executors of standing instructions of overseas clients.

 Corporate Customers- Public limited companies and group companies need various types of services based on their type of business. Consultancy service to corporate clients has become key profitable. Loan-syndication is another important service required by corporate clients. Internet Customers- New class of customers requires e-commerce service through internet.

Customer services
Range of Services offered by Banks are ever increasing and expanding. Mode of Service dealing in fast changing. Demand for ECommerce is reality. Banks are also in courier service. Many Services are need based and are customized. Corporate clients need package of service including cross-country service viz. import and export etc.

 Standard Services legally available to a customer include deposit and withdrawal of money to and from the accounts. Giving loans/credit is another very important service. Ancillary Services may include carrying out various instructions of clients for payment and collection of funds, providing investment facility offer guarantees on behalf of the customer etc.

 Cross Country Services: Clients living abroad need very special services. These are exchange control related matters. Promotional Services: Imaginative and dynamic bankers promote clients with ideas for futures. Banks can promote innovative customers and create its own class of client instead of depending on clients from other banks.

Expectation of Customers
Customers expect:a) Safety of money and investments, Regular standard income against investment and receiving payment against account promptly at lowest cost; b) Courteous behavior and respectful replies to the queries however stupid the questions may be. Replies should quick and may be from any distance.

c) Appreciation for being good client of long standing and incentives; d) Availability of loans in times of need and speedy decision in this respect at competitive rate of interest; - Consumer credit, credit cards etc. e) Personal Proximity cum intimacy with the banks through contacts at personal level.

f) As many Types of new service facilities are offered by modern bank e.g. withdrawal though ATM, internet, computer transactions etc. customers also expect these facilities. g) Customers do not expect that banks shall expect anything from them except return of its loans if any with interest and fees.

Strategy to meet customers Expectation

a) Simple and quick delivery of services though modern means; Branch points, booth, ATM internet-computer Banking. b) Providing up to-date information to the clients regularly about the full range of facilities available from the bank and the ways to get it. For example, various deposit schemes, loan schemes, consumer credit facilities should be sent to the clients home and or through Internet.

c)
d)

e)

Keep the clients informed about the rating of the bank and position for assurance of safety security. Promptly give decision on prayers for loans and credit and offer the best rates. Deepen the relationship through regular contact, over phone, fax, internet and other sale services. Customers total need should be found out and accommodated. Explain carefully and faithfully if bank is unable to accommodate a clients request of any kind and advise him/ her the best thing he/ she can do in these circumstances.

f) Special booth by highly skilled persons to provide consulting on various matters! Investment consulting. g) The nearer the client the better. h) Branches should be made smaller but made independent agency.

Multi Distribution Services VS. Multi channel Services.

a) Multiple Services point (Branch) may be used to deliver complete service. This point is to be terminal point. Referee at higher level shall not be needed. Each client according to their needs would go the required channel can dispose off the request finally. Multiple channel to distribute services. Example: ATMs with wide arrange and networks for basic services, Corporate Service offers to serve corporation under designated officers. Cost of services shall depend on the channels used.

b)

c)

Core Banking These are the activities of a typical commercial bank that has both personal and business customers; deposits and savings accounts personal and commercial lending payment services including direct debits, cheques, cash, High Value payments and currency payments Trade products such as Letters of Credit and international Bonds and Guarantees.

Service Management
In order to promote customer loyalty and satisfaction, the feeling has to be good. Some major tools that can be leveraged to promote customer satisfaction: Differentiation-Service should be extended in such a way that the customer is easily able to appreciate the difference. It should be designed for distinction. In marketing differentiation plays a major role in securing businesss.

 Speed- Speed is another parameter of importance in service. Faster the progress of work and lesser the time taken, the more satisfied is the customer. Many times the customer becomes impatient with the processing time taken in the service because he is more worried with the result and secondly it is difficult to set quality standards in service. In ebusiness, if the speed of download is slow, the customer is not going to wait; he will switch to another site.

 Trust Building- Trust is very important in service. Most of the service contracts are awarded based on trust. Since service is a feeling, it is necessary that trust is built up right from the beginning with the customer to ensure that he has both comfort and confidence. Personalise- personalising the service, making the customer feel important and devoting time to understand his requirement makes the customer attached to the vendor and builds a bond of emotion and trust. Personalisation of the service is the biggest Satisfaction provider.

 Deliver End-to End service- Any service provider should offer total service (end-toend service). Total service capability also increases the customer retention rate. Many banks are now offering savings-cum-fixed deposit combined facility. They are also taking separately portfolio management services. The bank can offer such services to valued customers in a focused and combined way.

 Price/Cost of Service- This is one of the greyest areas that cause widespread dissatisfaction among customers. It must be remembered that the cost of the service is a sensitive issue for the customer and plays a major role in his satisfaction. Listen to another people around you- no matter what their experience or lack of it and listen without judgmentevery opinion is a valid one. If you listen two or three ideas together they can often spark a fourth, which you wouldnt have arrived at if youd heard them with a judgment.

 Use praise- use praise more frequently and more sincerely than youve ever done in the past. If you cant say something positive, dont say anything. Always be seen to be fair and honest. Share your concerns- Managing a customer service team is not an easy job. You need to be decisive and have the confidence and courage that inspires people, there is much to be gained from being open and sharing your own hopes, dreams and concerns. Remind people what youre doing, where youre going and why you do what you do.

 Become a teacher- Instead of finding fault, managing by exception, and pointing out where people are going wrong, become obsessed with helping people become twice as good as they are now. There is nothing more satisfying than seeing other people around you do well, especially if you know youve contributed to that. Dont ask yourself what can I do for myself? Instead, ask yourself how Can I help my team become a better team?

How to make every Customer a Special Customer?

S peed P ersonalise E xceed exceptions C ompetence I nformation A ttitude Can do L ong-term relationship

Termination of BankerCustomer Relationship:

1. Customers Request 2. Unclaimed Deposit Account 3. Death of customer 4. Insanity of the customer 5. Insolvency of the customer 6. Undesirable customer 7. Attachment order issued by the income Tax authorities 8. On receipt of Garnishee Order

Thank You