Duties & Rights of a Banker and Customer Rights | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE A: GENERAL BANKING OPERATIONS

Banker-Duties & Rights of a Banker and Customer Rights

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Author: Bank Theory

1. Duty of Secrecy & Confidentiality

Bankers are obligated to maintain the confidentiality of their customer’s account details. Disclosure is only permitted under legal compulsion, with the customer’s consent, or for the bank’s interest in legal proceedings.

2. Duty of Reasonable Care

Bankers must exercise reasonable care in handling customer accounts and transactions. Errors and negligence can make banks liable for damages.

3. Garnishee or Attachment Order

A garnishee order is issued by a court to attach a debtor’s account held by a bank. Banks are required to freeze the specified funds once such an order is served.

4. Bank’s Rights

• Right of Lien: The right to retain goods or securities until dues are cleared.
• Right of Set-Off: Allows banks to combine and adjust accounts to settle debts.
• Right to Charge Interest and Commission: As per terms agreed upon.

5. Customer Awareness

Customers must be vigilant, update personal details regularly, and understand their responsibilities under the account terms.

6. Banking Codes and Standards Board of India (BCSBI)

BCSBI was set up to ensure that banks adhere to codes of commitment to customers, including fair treatment, transparency, and quality of service.

7. Obligations on the Customer

• Provide accurate information
• Safeguard chequebooks and passwords
• Promptly report errors or unauthorized transactions
• Maintain sufficient balance

MCQs (Multiple Choice Questions)

1. What is the primary duty of a banker regarding customer information?

A. To share it with all branches
B. To sell it to marketing agencies
C. To keep it confidential
D. To disclose only to friends

Answer: C. To keep it confidential

2. Under what condition can a bank disclose customer information?

A. Anytime they choose
B. For promotional purposes
C. Under legal compulsion
D. To compete with other banks

Answer: C. Under legal compulsion

3. What is a garnishee order related to?

A. Credit card limit
B. Freezing of bank accounts
C. ATM services
D. Loan processing

Answer: B. Freezing of bank accounts

4. What does the right of lien allow the banker to do?

A. Lend money without interest
B. Keep securities until dues are cleared
C. Disclose account details
D. Close the account without notice

Answer: B. Keep securities until dues are cleared

5. What is the full form of BCSBI?

A. Banking Code of Supervision Board of India
B. Banking Codes and Standards Board of India
C. Banker and Customer Standards Board of India
D. Bankers’ Credit Society and Bureau of India

Answer: B. Banking Codes and Standards Board of India

6. What does 'duty of reasonable care' imply for a banker?

A. Providing discounts
B. Preventing errors and handling accounts properly
C. Giving gifts to customers
D. Closing all dormant accounts

Answer: B. Preventing errors and handling accounts properly

7. Which of the following is an obligation on the customer?

A. Ignore transaction alerts
B. Share passwords
C. Report errors promptly
D. Keep passbook at the bank

Answer: C. Report errors promptly

8. The bank’s right of set-off allows it to:

A. Increase deposit rates
B. Transfer funds between accounts to settle dues
C. Cancel ATM cards
D. Block net banking access

Answer: B. Transfer funds between accounts to settle dues

9. What is expected from the customer for the safety of the account?

A. Disclose password
B. Ignore bank instructions
C. Use unsecured Wi-Fi
D. Safeguard chequebooks

Answer: D. Safeguard chequebooks

10. Which institution sets customer service standards in banks?

A. RBI
B. SEBI
C. BCSBI
D. IRDAI

Answer: C. BCSBI