Obligations on Bank customers

The obligations between Banks and their customers are reciprocal. Customer Obligations means all obligations of every nature of Customer from time to time under any Transaction Document, whether for the Aggregate Principal Outstanding, interest, fees, expenses, indemnification, or otherwise. By opening an account in the bank in the name of the customer, there will be some rights and duties conferred upon the customer towards the banker.

These obligations of the customers towards their bank are;

1. The customer must provide his/her photographs, PAN card copy, officially valid identity proof, address proof, etc. to fulfill the KYC formalities while opening the bank account or for the subsequent requirement of the bank.
2. Draw cheques in their account within the permissible balance in the account. It means cheques should not be issued against insufficient balance in the account.
3. Whenever a Temporary Overdraft is allowed, the customer should pay interest and reasonable service charges to the bank for the facility provided.
4. The customer should regularly verify the statement of his account.
5. Customers should immediately inform the bank if they notice an irrelevant credit/debit entry in his/her account.
6. Forgery in the amount of a cheque or any fraudulent transaction noticed in the account should be brought to the notice of the bank.
7. In the absence of any kind of arrangement by the customer, the banker is justified in returning the cheques at the cost and consequences to his customer.
8. Clearing Cheque return charges levied by the banks should be paid. (Both paying bank and collecting bank of cheques levy charges on returning local clearing or outstation cheques).
9. Customers should inform the bank if their chequebook is lost or stolen.
10. Charges levied against the Chequebook issued by the bank should be paid.
11. Interest on the outstanding balance of loan accounts or cash credit/packing credit accounts should be paid
12. Overdue interest on the overdue installment of loans or balance outstanding beyond drawing power in the Cash Credit account should be paid by the customer.
13. Commission/exchange on Bills purchased, discounted, and negotiated should be paid.
14. SMS alert charges should be paid.
15. Commission/exchange levied on DD issued, Banker’s Cheque, RTGS, NEFT, and ECS transactions should be paid.
16. Commission levied on foreign exchange transactions should be paid.
17. Levy of charge on Statement of Account issued, No objection Certificate or any other certificates issued on behalf of the customer should be paid. 
18. Customers should not sign blank or incomplete financial documents. They must sign on duly filled-in printed form/stamp paper while executing the documents provided by the bank.
19. Customer should use a debit card/credit card only by their conditions of use.

Legal decisions on customer’s obligation while writing cheques:

The writings in the cheque by the customer must be clear or visible properly to avoid any confusion like alteration or addition after the issue of the cheque.  Various Courts around the world quote the leading English case Young v. Grote determined in 1825. The doctrine of Young v. Grote is founded on the idea that the drawer must prevent or at least discourage alteration by carefully drawing checks and that such duty is an implied condition of his contract of deposit with the bank. In the Young v. Grote case, the court ruled that Young was guilty of gross carelessness and was liable to make good the loss to the bankers. In that case, Young drew checks on defendant Grote, blank as to amount and date In this case it was decided that the customer should take utmost care while drawing a cheque and if he failed the bank would not be held liable in this case.

The court’s decision was based on the following facts: Young caused his draft to be delivered to a clerk in a state that allowed the clerk to insert other words, making it appear to be a draft for a larger sum.  The clerk inserted the words, and the bankers paid the larger sum. The court also ruled that Young was estopped from saying that he did not sign the cheque for the amount in question.

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