📚 JAIIB 2025 • PPB • Module A • Chapter 18 of 21

Duties & Rights of Banker & Customer

Banker duties: secrecy (contractual, qualified — 4 exceptions), reasonable care, comply with garnishee/attachment. Bank rights: lien (general=FD, NOT locker), set-off, appropriation, interest/commission, termination. BCSBI codes (voluntary, RBI monitors). Customer obligations: KYC, password safety, report fraud.

⏱ 15 min read🎯 High Exam Weightage🧠 5 Memory Tricks⚡ 6 Flash Cards

Banky Learns Rights & Duties! ⚖️

Banking is a two-way street — banks have duties towards customers AND rights to protect themselves. Understanding secrecy obligations, lien rights, and BCSBI codes is essential for every banker!

“Sir, a customer ss wife called asking about his account balance. Can I tell her?” ⚖️

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Section 1 of 9

Why Read This Chapter?

Knowing banker duties AND rights = protecting customers AND protecting the bank

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What are the key duties and rights of a banker?

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Duties: (1) Secrecy — keep customer affairs confidential (contractual — exam PYQ!). But it is QUALIFIED (not absolute) — 4 exceptions: compulsion of law, public interest, bank’s own interest, customer’s consent. (2) Reasonable care as agent/bailee/trustee. (3) Comply with garnishee/attachment orders. Rights: (1) Lien (general on FD, NOT on locker contents — exam PYQ!). (2) Set-off. (3) Appropriation. (4) Charge interest/commission. (5) Terminate relationship. BCSBI codes: voluntary, BCSBI dissolved 2019, but codes still applicable.

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Exam Marks

3-4 questions — secrecy arises from contractual relationship (not specific law/BR Act), bank has lien on FD but NOT locker contents, BCSBI key commitment does NOT include sanctioning loans as requested, sharing info with IT officer only under written order. Very high weightage!

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Career Growth

Knowing duties prevents compliance violations; knowing rights prevents losses — both = complete banker

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Real Life

As a customer, you know when the bank CAN and CANNOT share your information

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Section 2 of 9

How Will It Benefit You?

Real career advantages

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Give me a real scenario!

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⚖️ Scenario: A customer has a clean overdraft AND a fixed deposit with your bank. He also has a safe deposit locker. He defaults on the overdraft. What can the bank do? Bank has general lien on the FD (can adjust against overdraft) ✅. But NO lien on locker contents (locker = bailee/trustee relationship) ❌. So: adjust FD against overdraft → YES. Touch locker → NO. Manager: ‘Correct application of lien rights!’ 🌟

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Section 3 of 9

What Is This Chapter About?

30-second summary

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Quick version, sir!

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This chapter covers: Duty of Secrecy: Arises from contractual relationship (exam PYQ! — not specific law, not BR Act). QUALIFIED (not absolute). 4 exceptions: (a) Compulsion of law (Banker’s Book Evidence Act, court summons, IT Act), (b) Public interest, (c) Bank’s own interest (recovering dues, legal notice), (d) Express/implied consent of customer. Sharing balance with spouse = NOT authorised (exam PYQ!). IT officer telephonic enquiry = NOT authorised (need written order). Sharing with recovery agency informally = NOT appropriate (exam PYQ!). Duty of Reasonable Care: As agent/bailee/trustee. Garnishee/Attachment: Must comply. Freeze/pay as ordered. Bank Rights: General lien (on FD — exam PYQ!), NOT on locker contents (locker = custody, not lien). Set-off, appropriation, charge interest, terminate relationship (voluntary: death/insolvency/insanity/closure). BCSBI: Set up 2006. 2 codes: Customer Code + MSE Code. BCSBI dissolved April 2019 but codes still applicable. RBI monitors. Key commitments: fair dealing, help use services, deal sympathetically. NOT: sanction loans as requested (exam PYQ!). Customer obligations: KYC, password safety, report fraud, dont click unknown links.

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Section 4 of 9

Key Definitions — Banky Asks, Mentor Explains

Every term explained like you’re 10

Critical Term

Duty of Secrecy

Keep customer affairs confidential — arises from CONTRACTUAL relationship (not specific law/BR Act!) — QUALIFIED, not absolute

Contractual

Banky’s Understanding: Duty of secrecy: Implied obligation from contractual relationship (exam PYQ! — not from specific banking secrecy law, not from BR Act, not from ICA). Qualified (not absolute) — 4 exceptions: (a) Compulsion of law (Bankers Book Evidence Act, court summons, IT Act, other laws). (b) Public interest. (c) Bank’s own interest (recovering dues, legal notices to guarantors). (d) Express/implied consent of customer. Spouse asking balance = NOT authorised. IT officer telephoning = NOT authorised (need written order).

🧒 Analogy: Like a doctor’s patient confidentiality — it comes from the relationship (contract), not a separate law. And there are exceptions: court orders, public health emergencies, patient consent!

Critical Term

Bank’s Lien Rights

General lien on FD (can adjust against dues) — but NO lien on safe deposit locker contents!

FD yes, locker no

Banky’s Understanding: Bank has general lien on FD — can adjust FD proceeds against customer’s dues (overdraft, loan default). NO lien on locker contents (exam PYQ!) — locker = bailee/trustee relationship, not creditor-debtor. Also no lien on: safe custody articles, documents for specific purpose, items left negligently. General lien: Sec 171 ICA = implied pledge. Set-off: combine credit and debit accounts. Appropriation: Clayton’s rule (oldest first).

🧒 Analogy: The bank can hold your FD hostage if you owe money (lien on FD ✅). But the bank can NOT open your locker and take your gold (no lien on locker ❌). Different relationships = different rights!

Critical Term

BCSBI Codes

Voluntary codes for fair banking — BCSBI dissolved 2019 but codes still apply — RBI monitors compliance

Still applicable

Banky’s Understanding: BCSBI: Banking Codes and Standards Board of India. Set up 2006 (Tarapore Committee). Two codes: (1) Code of Commitment to Customers (2006, revised 2018). (2) Code of Commitment to MSEs (2008, revised 2022). BCSBI dissolved April 2019 (RBI’s CEPD took over). But codes still applicable — RBI monitors compliance. Key commitments: act fairly, help use services, deal sympathetically, treat info as private, publicise code, non-discrimination. ⚠️ NOT: sanction loan as per request (exam PYQ!).

🧒 Analogy: BCSBI codes are like school rules that still apply even after the school council is dissolved — the principal (RBI) still enforces them!

Critical Term

Customer Obligations

Provide KYC, keep passwords safe, dont share OTP, report fraud promptly, dont click unknown links

Customer duties

Banky’s Understanding: Customer obligations: (a) Provide KYC documents. (b) Keep passbook/cheque book/debit card safely. (c) Keep User ID/password/PIN confidential. (d) Report unauthorized transactions promptly. (e) Dont allow third party to use account. (f) Dont share info with anyone calling as bank. (g) Dont click links in unknown emails/SMS. (h) Sign as per specimen signature. (i) Register mobile/email for alerts. (j) Use verified websites. (k) Change password/PIN regularly. (l) Block lost cards immediately.

🧒 Analogy: Like a gym member’s responsibilities — keep your membership card safe, don’t share it, report theft immediately, and follow the gym’s rules. The gym (bank) protects you, but you must also protect yourself!

Critical Term

Termination of Relationship

Voluntary (customer closes A/c) or by law (death/insolvency/insanity/garnishee/bankruptcy)

Two types

Banky’s Understanding: Voluntary termination: Customer closes account. Bank closes unremunerative/undesirable accounts (after notice). Termination by law: (a) Death — stop operations, pay nominee/legal heirs. (b) Insolvency/bankruptcy — pay to receiver/liquidator. (c) Insanity — stop operations after medical confirmation. (d) Garnishee order — freeze, close if required. Even cheques dated before death/insolvency should not be paid after notice received.

🧒 Analogy: Like ending a phone contract: you can cancel voluntarily, or it ends automatically if you don’t pay (bankruptcy), are declared incompetent (insanity), or the court orders it (garnishee)!

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Section 5 of 9

Chapter Explained in Simple Stories

So easy even Banky’s nephew understands

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Sir, explain this like a story!

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Three bite-sized stories coming up — impossible to forget! 🚀

⚖️ Block 1: Duties — Secrecy, Care & Garnishee

Secrecy: From contractual relationship (exam PYQ!). Qualified (4 exceptions): law, public, bank interest, consent.

Spouse asking balance = NOT authorised. IT officer telephone = NOT authorised. Recovery agency informally = NOT appropriate (exam PYQ!).

Reasonable care: As agent/bailee/trustee. Garnishee/attachment: Must comply — freeze/pay.

Key Term

Secrecy = Contractual

Duty of secrecy arises from the CONTRACTUAL relationship between bank and customer. Not from a specific banking secrecy law, not from BR Act. It is implied in the debtor-creditor contract.

🧑‍💼 Banky: “Secrecy = contractual (not BR Act!), 4 exceptions, spouse = NOT authorised, IT phone = NO! ⚖️”

🔐 Block 2: Rights, BCSBI & Customer Duties

Bank rights: General lien on FD (adjust against dues). NO lien on locker contents (exam PYQ!). Set-off, appropriation (Clayton), interest, termination.

BCSBI: Dissolved 2019 but codes still apply. RBI monitors. Key commitment ≠ sanction loans as requested (exam PYQ!).

Customer duties: KYC, password safety, report fraud, dont share OTP, dont click unknown links, register mobile for alerts.

Key Term

No Lien on Locker

Bank has general lien on FD but NO lien on safe deposit locker contents. Locker = bailee/trustee relationship. Bank cannot touch locker contents to recover customer’s dues.

🧑‍💼 Banky: “Lien on FD=yes, locker=NO! BCSBI codes still apply. BCSBI ≠ sanction loans! 🔐”

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Section 6 of 9

Exam Angle — Every Testable Point

All facts, numbers, definitions JAIIB tests

✅ Must-Know Facts — Highest Probability

Secrecy arises from CONTRACTUAL relationship (not specific law/BR Act!) — exam PYQ!
Secrecy is QUALIFIED (not absolute) — 4 exceptions: law/public/bank interest/consent
Spouse asking balance = NOT authorised | IT officer telephone = NOT authorised
Sharing with recovery agency informally = NOT appropriate — exam PYQ!
Bank has general lien on FD but NO lien on locker contents — exam PYQ!
BCSBI dissolved April 2019 but codes STILL applicable — RBI monitors
BCSBI key commitment does NOT include sanctioning loans as requested — exam PYQ!
Garnishee order: bank must comply — freeze/pay as ordered
Termination: voluntary (customer/bank) or by law (death/insolvency/insanity/garnishee)
Even cheques dated before death should not be paid after notice of death
Set-off: combine credit and debit accounts of same customer
Customer must report unauthorized transactions promptly
Customer should not share OTP/password/PIN with anyone calling as bank

📝 Previous Year Questions

Q: Secrecy obligation arises from:

A: (c) Contractual relationship ✅

Q: Bank sharing info — which is authorised?

A: (b) Balance blocked per IT attachment order (written) ✅

Q: Sharing with recovery agency informally:

A: (d) NOT appropriate ✅

Q: Bank lien on FD + locker:

A: (a) General lien only on FD ✅ (NOT locker)

Q: BCSBI key commitment NOT include:

A: (b) Sanction loan as per request ✅

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Section 7 of 9

Memory Tricks That STICK

Lock every fact permanently

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Too many facts! Help! 🤯

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These tricks will lock everything in forever! 🧲

🧠 Trick 1 — Secrecy = Contractual

Not BR Act!

Secrecy from CONTRACT! (Not specific law!) (Not BR Act!) (Not ICA!) = Implied in debtor-creditor!

Duty of secrecy is implied in the contractual (debtor-creditor) relationship. There is no separate banking secrecy law in India.

🧠 Trick 2 — Lien: FD Yes, Locker No

Key distinction

LIEN on FD = YES ✅ LIEN on Locker = NO ❌ (FD = creditor relationship) (Locker = bailee/trustee)

Bank has general lien on FDs (can adjust against dues). But NO lien on locker contents — locker is a custody/trusteeship relationship, not lending.

🧠 Trick 3 — 4 Secrecy Exceptions

When bank CAN share

Bank CAN share info when: 1. LAW compels (court/IT Act) 2. PUBLIC interest 3. BANK’s own interest (recovery) 4. CUSTOMER consents (4 exceptions to secrecy!)

Secrecy is not absolute. These 4 situations allow banks to disclose customer information legitimately.

🧠 Trick 4 — BCSBI ≠ Loan Sanction

Key commitment trap

BCSBI commits to: Fair treatment ✅ Help use services ✅ Deal sympathetically ✅ Sanction loans as requested ❌ (NOT a commitment!)

BCSBI codes commit banks to fair treatment, transparency, and good service. But sanctioning loans as per customer request is NOT a commitment — credit decisions are the bank’s prerogative.

🧠 Trick 5 — Spouse = NOT Authorised

Secrecy example

Wife asks husband’s balance? = NOT authorised! ❌ IT officer phones for balance? = NOT authorised! ❌ (Need written order/customer consent!)

Neither spouse nor IT officer making a phone call is authorised to receive account information. Spouse needs customer’s consent. IT officer needs a written order.

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Section 8 of 9

Visual Summary — Chapter Map

Entire chapter in one diagram

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Section 9 of 9

Flash Revision — Last-Minute Cards

Read these 10 minutes before exam

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EXAM IN 15 MINUTES! 😰

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6 cards — read twice, you’ll get every question right! 💪

Secrecy

From CONTRACTUAL relationship | Qualified

4 exceptions: law/public/bank interest/consent

Lien

FD = YES (general lien) | Locker = NO

Locker = bailee/trustee, not lien

BCSBI

Dissolved 2019 but codes STILL apply

RBI monitors | NOT: sanction loans as requested

Garnishee

Must comply — freeze/pay as ordered

Court order | Attachment by IT/revenue

Termination

Voluntary or by law (death/insolvency/insanity)

Cheques before death = still dont pay after notice

Customer Duty

KYC + password safety + report fraud

Dont share OTP | Dont click unknown links

⚡ Chapter 18 Complete — Duties and Rights of a Banker and Customer Rights

Secrecy: contractual (not BR Act!), qualified, 4 exceptions — spouse/IT phone = NOT authorised
Lien: FD = yes (general lien) | Locker = NO | Set-off, appropriation, interest, termination
BCSBI: dissolved 2019, codes still apply, RBI monitors | NOT: sanction loans as requested
Customer: KYC, password safety, report fraud, dont share OTP, register mobile for alerts

Banky says: “Secrecy=contractual, lien FD=yes locker=NO, BCSBI≠sanction loans, spouse=NOT authorised!” 🎉⚖️

You now understand BOTH sides — banker duties AND rights. Protecting customers AND the bank is your dual responsibility! 💪

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