JAIIB PPB Paper-2 Module-A Unit 18: Duties and Rights Of A Banker And Customer Rights

JAIIB Paper 2 (PPB) Module A Unit 18: Duties and Rights Of A Banker And Customer Rights (New Syllabus) 

The Institute of Indian Banking and Finance (IIBF) has recently announced the revised syllabus and exam format for the JAIIB Exam 2023. The upcoming exam will comprise of four papers, with Paper 2 (Principles & Practices of Banking) covering Unit 18: Duties and Rights Of A Banker And Customer Rights. This particular unit holds significant importance for candidates, as it will greatly impact their performance in the exam.

To assist candidates in comprehending the topic, we will provide all the necessary details related to Unit 18: Duties and Rights Of A Banker And Customer Rights of JAIIB Paper 2 (PPB) Module A: General Banking Operations. We strongly recommend candidates to refer to this article and also utilize our Online Mock Test Series to enhance their understanding of Foreign Currency Accounts for Residents and other related aspects.

For candidates appearing for the JAIIB Certification Examination 2023, it is essential to comprehend each unit in the syllabus, including the Marketing unit. This unit holds great importance in the banking industry, and candidates must prepare thoroughly to excel in the exam and establish a successful career in the banking sector.

Duty Of Secrecy and Confidentiality

The debtor-creditor relationship between a bank and customer is of a special kind. It is a contractual relationship that has an implied obligation to keep the affairs of the account of customers, secret and confidential.

The duty of non-disclosure is contractual and legal. Thus, the bank would be protected only if it discloses the affairs of the customers under certain legally permissible compulsions or circumstances as follows:

  • Where disclosure is under compulsion of law
  • Where there is duty to the public to disclose
  • Where interest of bank requires disclosure
  • Where the disclosure is made with the express or implied consent of the customer.

Disclosure Under Compulsion Of Law

  • Banker’s Books Evidence Act, 1891: As per Sections 4 and 6 of the Banker’s Books Evidence Act, in a legal dispute between a bank’s customer and third party, certified copies of entries in the bank’s books may be called for, which shall be prima facie evidence of the existence of such entries in the  bank’s books
  • Summons by Civil/ Criminal Courts: The Civil/ Criminal Courts have the power to issue summons to banks to produce documents or tender evidence.
  • Income Tax Act, 1961: The Income Tax Officer or specified higher officers of the Income Tax Department, under the powers vested by Section 133 of the Income Tax Act, may call for books of account or other documents from banks, if they consider that will be useful in any proceedings.
  • Other Acts: The other relevant Acts under which information can be called from a banker are Companies Act, 2013, Reserve Bank of India Act, 1934, Foreign Exchange Management Act, and Gift Tax Act.

Duty to Disclose in Public Interest 

  • It could arise if the customer happens to be dealing with terrorists, illegal drug trafficking or smuggling or similar serious anti-national and illegal activities.

Disclosure in the Interest of the Bank Itself 

  • A bank would be protected when it furnishes information about a borrower’s account to the guarantors or their solicitors for recovering the dues.
  • General information about loan accounts of a borrower exchanged with/ given to other bank or co-banker would also be protected by banking custom as it is in self-interest for taking precaution in respect of loans in default.
  • In terms of Section 15(1) of Credit Information Companies (Regulation) Act, 2005, every credit institution has to become a member of at least one Credit Information Company within a period of three months from commencement of the Act  and provide credit data in the format as required by the Credit Information Company (CIC).

Disclosure with Expressed or Implied Consent of the Customer 

  • Banks may disclose information at the request or explicit instruction of the customer.

Duty of Reasonable Care

  • Due Diligence is required while discharging its duty as agent/ bailee/ trustee of a customer. If a customer suffers loss due to improper care or negligence of the bank, he/she may claim specific damages from the bank for making good the loss.

Garnishee or Attachment Order

  • On receipt of a garnishee order from a court or attachment order from Income Tax Authorities (under section 226 of Income-tax Act), the bank should immediately stop debit operations in the account attached and intimate the customer of the order and  the resultant stoppage of the operation in the account.

Bank’s Rights

  • Bank’s Lien
  • Right to Set-off
  • Right of appropriation of accounts
  • Right to charge interest/commission
  • Termination of Banker-Customer Relationship

Voluntary termination

Termination by law

a)Death of customer

b)Bankruptcy of a customer/ liquidation of a Company

c)Garnishee Order

d)Insanity of customer

Banking Codes and Standards Board Of India

  • In November 2003, RBI constituted the Committee on Procedures and Performance Audit of Public Services under the Chairmanship of Shri. S.S.Tarapore (former Deputy Governor) to address the issues relating to availability of adequate banking services to the common man.
  • The Committee recommended setting up of the Banking Codes and Standards Board of India (BCSBI) on the lines of Banking Codes and Standards Board functioning in U.K.

Status Of BCSBI

  • The BCSBI was registered as a separate society under the Societies Registration Act, 1860 on 18th February 2006.
  • BCSBI had in collaboration with the Indian Banks’ Association (IBA), evolved and issued following two Codes

(i)Code of Bank’s Commitment to Customers (issued in 2006 and revised in 2018)

(ii)Code of Bank’s Commitment to Micro and Small Enterprises (MSE Code) (released on May 31, 2008, reviewed in 2012, and again in 2015)

  • BCSBI has discontinued operations related to the objects of the Trust effective from April 1, 2019. RBI has since set up Consumer Education and Protection Department (CEPD), issued the Charter of Customer Rights (CoCR) and considerably strengthened the Ombudsman mechanism to enhance consumer

Code of Bank’s Commitment to Customers

  • It was issued on 1 July, 2006, and revised in August 2009 and 2014 to bring about greater transparency, and further enhancements in banking practices.
  • The codes represent each member bank’s commitment to minimum standards of service to individual customers in relation to products and services offered by the bank, like:  Deposit accounts, Safe deposit lockers, Settlement of accounts of deceased account holders, Foreign exchange services, Remittances within India, Loans and advances and guarantees, Credit cards, Internet 

Code of Bank’s Commitment to Micro and Small Enterprises

  • This code was brought out by BCSBI in May 2008 and sets minimum standards of banking practices for banks to follow when they are dealing with Micro and Small Enterprises (MSEs) as defined in the MSMED Act, 2006.
  • It provides protection to MSEs and explains how banks are expected to deal with them for their day to day operations and in times of financial difficulty. The code was revised in 2012 and again in 2015.
  • All the aspects covered in the Code of Bank’s Commitment to Customers are also covered in the Code of Bank’s Commitment to Micro and Small Enterprises. In addition, the Code of Bank’s commitment to MSEs is also applicable to Letters of Credit, Bills, Factoring services and Merchant Services.

Key Commitments Under The Codes

  • To act fairly and reasonably in all their dealings with target customers
  • To help customers to understand how bank’s financial products and services work
  • To help customers use their account
  • To deal quickly and sympathetically with things that go wrong
  • To treat all personal information of the customers as private and confidential
  • To publicise the Code
  • To adopt and practice a non-discrimination policy
  • To have proper Grievance redressal mechanism

Obligations On The Customers

The codes brought out by BCSBI do not put any obligation on the part of the customers. Acceptance of the Codes is a voluntary initiative by a bank.

Certain important obligations of a customer towards her bank are:

  • To provide the required documents and information, including personal information for KYC.
  • To keep the pass book, the cheque book and the debit card safely.
  • To keep confidential the User ID and password for access to various channels.
  • To inform promptly the bank about any unauthorized transaction noticed in the account.
  • Not to allow any third party to use own bank account for its transactions.
  • Not to provide any personal or account related information, including User ID password, OTP, etc. to any one purporting to call on behalf of the bank.
  • Not to click on any link received through emails, sms, etc. for accessing the bank’s website.
  • To sign all cheques or forms or letters to the bank as per the specimen signature provided to the bank.
  • To use non-home branches only for the permitted transactions, and when it becomes essential.
  • To register one’s own mobile number and email ID with the bank to get alerts
  • Not to store important banking data in mobile, email or in the purse/ wallet.
  • To use only verified, secure and trusted websites for online banking transactions.
  • To use debit cards or credit cards only at authorised ATMs, or merchant establishments
  • To change one’s online banking password and PIN regularly.
  • To request to block one’s ATM Card, Debit Card, Credit Card, Prepaid Card if lost/ stolen.

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