10 Types of relationship between banker and customer

Kinds of relationship between banker and customer are as follows:

Types of relationship between banker and customer

BASIC RELATION

1. Relation of Debtor and Creditor:

The relation between a banker and his customer is primarily that of ii debtor and’creditofTwKichcanbe explained in following wavs

• Bank (Debtor) & Customer (Creditor):

When customer deposits money in his account, the money is to be considered as the money of depositor, so he has the right to withdraw it utany timcf as per rules of bank. Here the bank is the debtor and customer Is the creditor, —

• Bank (Creditor) & Customer (Debtor):

When a customer takes loan from bank or avails overdraft from bank then tfie~bahk is a creditors and customer is a debtor in this relation.

OTHER RELATIONS

2. Bailer and Bailee:

When a banker takes charge of his customer’s valuable goods, he becomes a bailee. The customer who deposits property in the

Bailer. This relation of bailer and bailee is the oldest relation between a

bankerancT customer.

3. Mortgager and Mortgagee

When a banker accepts real estate like md and building etc, as security of loan way to mortgage, the relationship becomes that of mortgager and mortgagee. In this relation, the cvtomer is a mortgager and the bankTs mortgagee-

4. Principal and Agent

When a banker acts according to the instructions or on the behalf of its customer then their relationship of principalcustomer)andagent (bank) exists. When the bank buys or sells securities on behalf of its customer^ it performs an agencyTunction. Similarly, when it collects cheques, drafts, bills and other instruments and pays fee, rentetc, on

behalf of its customer, it acts as his agent.

5. Modarib and Zarib:

When a banker provides finance to customer under the agreement of Modaraba, the relationship becomes that of Zarib and Modarib. The banker being a financer is Zarib (Rab-ul-Mal) and the customer having skill is Modarib (Aamal).

6. Purchaser and Seller:

Under deferred payment sale on mark up mode of financing, the banker is the seller of goods financed and the customer is purchaser of the same.

7. Lesser and Lessee:

When a banker provides finance to a customer on the basis of lease financing the relationship becomes that of a lessee and lesser. In this case the banker is lesser and the customer is lessee.

8. Trustor and Trustee:

When a bank receives securities and valuable goods for the custody, the banker’s position is that of a trustee and the customer becomes the trustor, e.g., Locker facility provided by the bank etc.

9. Pledger and Pledgee:

When a customer pledges an article (goods and documents) with the banker as a security for payment of debt or performance of promise the

ielation between customer and banker exists. The customer becomes pledger (pawnor) and the banker becomes pledgee (pawnee).

10. Hirer and OwnerJH

In case of hire purchase financing the banker is the owner of the ir.set and the customer is hirer of the same. Under this system, the bank purchases the required good at the request of client and hires those good to ihe client.

11. Advisor and Advisee:

When a bank gives financial advice to its customer then bank becomes advisor and customer becomes advisee.

12. Cordial Relation:

Sometimes the banker is in a position to establish cordial relation with his customer by providing reliable and confidential information about I he general standing of people.

In the world of finance, the relationship between a banker and customer is of utmost importance. This dynamic bond determines how the customer’s financial needs are met and how the banker serves as a trusted advisor. Understanding the different types of relationships that can be established between a banker and a customer is crucial for both parties to achieve their financial goals effectively. Let’s explore these relationships in detail.

1. Transactional Relationship:

One type of relationship between a banker and a customer is the transactional relationship. In this scenario, the interaction between the two is limited to specific transactions, such as depositing or withdrawing funds, processing loan applications, or carrying out other financial transactions. The customer typically does not seek extensive advice or guidance from the banker beyond these transactions.
Example: When a customer visits a bank to deposit a check, the interaction with the teller is purely transactional. The customer performs the necessary transaction and moves on.

2. Consultative Relationship:

In a consultative relationship, the banker takes on the role of an advisor and guides the customer in making informed financial decisions. This relationship involves a deeper level of engagement, where the banker actively offers personalized advice and recommendations based on the customer’s financial situation and goals. The customer relies on the banker’s expertise to navigate complex financial matters.
Example: A small business owner seeking to expand their operations may consult with their banker to explore different financing options, evaluate risks, and determine the most suitable loan package for their needs.

3. Relationship Banking:

Relationship banking goes beyond individual transactions and focuses on building a long-term partnership between the banker and the customer. This relationship is characterized by trust, loyalty, and mutual understanding. The banker takes a proactive approach in understanding the customer’s financial needs and offers tailored solutions to address them. Regular communication and personalized attention are key components of this relationship.
Example: A high-net-worth individual may develop a relationship with a private banking advisor who manages their investment portfolio, provides financial planning advice, and assists with estate planning for future generations.

4. Commercial Relationship:

When it comes to businesses, a commercial relationship between a banker and a customer is established. This relationship caters specifically to the financial needs of businesses, such as loans for expansion, lines of credit for operational expenses, or treasury management services. The banker works closely with the business owner or financial team to understand their unique requirements and provide suitable financial solutions.
Example: A manufacturing company may partner with a bank that offers specialized commercial banking services, including trade finance, foreign exchange, and customized cash management solutions.

5. Trustee Relationship:

In some cases, a banker may also act as a trustee for the customer. Trustee relationships involve the management and administration of trusts, estates, or other fiduciary responsibilities. The banker in this role has a legal obligation to act in the best interests of the customer and oversee the proper handling of assets according to the terms of the trust or estate.
Example: When an individual sets up a trust to manage their wealth for the benefit of their children, they may appoint a banker as the trustee responsible for managing the trust assets and distributing funds as per the trust agreement.

Conclusion:

The types of relationships between a banker and customer span from purely transactional to long-term partnerships built on trust and personalized attention. Understanding these various dynamics allows both parties to make the most of their financial interactions. Whether you seek guidance on individual transactions or require a trusted advisor for complex financial matters, finding the right banker can greatly enhance your financial well-being. Remember, it is essential to communicate your specific needs and goals to ensure a successful and fruitful relationship with your banker.