The relationship between a banker and a customer is not limited only to accepting deposits and giving loans. In modern banking, this relationship has expanded to include a wide range of financial services provided to customers and investors. Banks today act as financial advisors, service providers, custodians, agents, trustees and facilitators of investment activities.
Meaning of Banker–Customer Relationship in the Context of Services
A banker–customer relationship is a contractual relationship where the bank agrees to provide certain financial services and the customer agrees to follow the terms and conditions laid down by the bank. When banks provide services beyond basic deposit and credit facilities, the nature of the relationship may change depending on the service offered. In some cases, the bank acts as an agent, in some as a trustee, and in some as a bailee or custodian.
The quality of services provided plays a key role in customer satisfaction, trust, and long-term association, which is extremely important for banks.
Services Provided to Customers
Deposit-Related Services
Banks provide various deposit products to customers to help them save money safely and earn interest. These include savings accounts, current accounts, fixed deposits, recurring deposits, and special deposit schemes. Along with accepting deposits, banks also provide services such as passbooks, account statements, interest credit, nomination facility, and premature withdrawal options.
In this relationship, the bank becomes a debtor and the customer becomes a creditor. The bank is legally bound to repay the money as per agreed terms.
Payment and Remittance Services
Banks play a vital role in facilitating payments and fund transfers. Customers rely on banks for secure and timely movement of funds. These services include cheque clearing, demand drafts, banker’s cheques, NEFT, RTGS, IMPS, UPI, ECS, and standing instructions.
By offering these services, banks act as agents of customers. They must execute instructions carefully and without delay. Any negligence in handling payments may make the bank liable for losses suffered by the customer.
Digital and Electronic Banking Services
With the advancement of technology, banks now offer services such as internet banking, mobile banking, ATM facilities, debit cards, credit cards, prepaid cards, and digital wallets. These services provide convenience, speed, and 24×7 access to banking facilities.
Banks have a responsibility to ensure data security, confidentiality, and fraud prevention while providing digital services. Customers are also expected to follow safety guidelines such as protecting passwords and PINs.
Credit and Loan Services
Banks provide various types of loans to customers such as personal loans, home loans, education loans, vehicle loans, business loans, and agricultural loans. Apart from disbursing loans, banks also provide advisory services regarding loan eligibility, repayment capacity, interest rates, and documentation.
In loan services, the bank is a creditor and the customer is a debtor. The relationship is governed by the loan agreement, and banks must follow fair lending practices as prescribed by RBI.
Advisory and Value-Added Services
Banks provide financial advisory services to customers to help them manage their finances efficiently. These services include guidance on savings, investments, insurance, tax planning, retirement planning, and wealth management.
Although banks may charge fees for advisory services, they are expected to act with due care, skill, and transparency, especially when recommending financial products.
Services Provided to Investors
Apart from ordinary customers, banks also serve investors who invest in financial instruments such as shares, bonds, mutual funds, and government securities.
Investment Advisory Services
Banks help investors by providing information and guidance on various investment options based on risk appetite, return expectations, and investment horizon. These include fixed income products, mutual funds, bonds, debentures, and government schemes.
While providing advisory services, banks must comply with RBI and SEBI guidelines and avoid mis-selling. Investors should be properly informed about risks involved in each product.
Distribution of Financial Products
Banks act as distributors of various third-party financial products such as mutual funds, insurance (bancassurance), pension products, and government savings schemes.
In such cases, the bank acts as an agent of the product issuer and earns commission. The banker-investor relationship requires the bank to provide full disclosure and ensure that products are suitable for the investor.
Demat and Custodial Services
Banks provide Demat account services to investors for holding securities in electronic form. They also act as custodians by safeguarding securities and facilitating transfer, pledge, and settlement of investments.
In this role, the bank acts as a bailee or trustee and must exercise high standards of care. Any negligence leading to loss of securities can result in bank liability.
Government Securities and Retail Investment Services
Banks help investors invest in government securities through platforms like RBI Retail Direct Scheme, savings bonds, treasury bills, and sovereign gold bonds. These services help retail investors participate in the government securities market safely.
Banks also assist in interest collection, maturity proceeds, and periodic statements, strengthening investor confidence.
Responsibilities of Banks Towards Customers and Investors
Banks are expected to follow certain ethical, legal, and regulatory standards while providing services:
- To provide services with due care, skill, and diligence
- To maintain confidentiality of customer and investor information
- To follow Know Your Customer (KYC) and Anti-Money Laundering (AML) norms
- To ensure fair treatment and transparency
- To resolve grievances promptly through grievance redressal mechanisms
Failure to fulfill these responsibilities can damage trust and lead to legal consequences.
Importance of Banker–Customer Relationship in Service Delivery
A strong banker–customer relationship ensures customer loyalty, financial inclusion, and long-term growth of banks. Efficient services increase customer satisfaction, while poor service can result in loss of reputation and business.
For investors, trust in banks encourages greater participation in financial markets, leading to overall economic development.
Conclusion
In the context of services to customers and investors, the banker–customer relationship extends far beyond traditional banking. Banks act as service providers, advisors, agents, trustees, and custodians, depending on the nature of service offered.