When precisely one becomes a customer of the bank?

The point in time when one precisely becomes a customer of the bank is extensively debated on and off. The subject of deeming a person as a customer of the bank is important more so to bankers in the following situations. The banker may risk forfeiting immunity provided to him under section 131 of NI act, in case payment of a cheque received by the bank for a person proved to be a non-customer. A person’s legal heir is entitling for insurance settlement under PMJDY scheme, in the case of his unfortunate accident or death, provided he must be a customer of the bank. Thus, the crux of the debate is over the timing when precisely one should be deemed as a customer of the bank, whether it is on bank accepting application from prospective customer for opening the account or on acceptance of cash deposit from him for opening the account or after the information of the customer recorded and approved by the bank in its system.

Since the term ‘customer’ is not defined anywhere in the law, we have to go by the practices followed by the banks for opening customer’s account.  In the past banks were opening the new account of a person only after the initial deposit of cash by him/her. However, that system of opening the account with the initial deposit of cash has lost its relevance now as banks are opening ‘No frill or Jan Dhan Accounts with NIL balances, without demanding any cash deposit from the customers for opening the account. Hence, it is rightly reasoned that one need not deposit money in the bank to become a customer of the bank. Hence, many experts speak out that once duly filled in account opening form with valid documents handed over to the bank, the applicant shall be deemed as a customer of the bank, without waiting for the bank recording customer’s information in its books.  This is because banks normally open the account of a customer on the same day they have accepted fully complied account opening form. However, on some occasions, the process of opening the account by the bank may be delayed either due to staff shortage or due to computer related problems. There arises a question, what happens to insurance claim under PMJDYif a person dies in the intervening period after bank accepted the account opening form and the actual day on which bank opened his account? It is contended that opening the account of the customer within a reasonable time is the obligation of the bank when all the conditions of account opening process were fulfilled by the customer. Therefore, the legitimate social security benefits like insurance claim available to the family of the deceased cannot be declined only to the reason that the account opening process in the bank was slow and not completed before the death of the customer.

 In the end, it is to be watched how insurance company handles the situation as they are the people to settle the insurance claim. If the insurance claim of the beneficiary is declined, the issue shall stand up to careful legal scrutiny. Of course, it depends upon the way in which the courts view the case in its entirety and also fine prints of insurance clauses for settlement of claims.

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