CLOSING OF A BANK ACCOUNT || THE RELATIONSHIP BETWEEN A BANKER AND A CUSTOMER

The relationship between a banker and a customer exists/begins by opening

of an account. This relationship extents (comes to an end) when the account is closed. The proposal to close the account may come from the customer or banker. When the customer requests the bank to close his account, it is referred to (called) as 'Closing an Account'. Similarly, when the banker takes initiative to close the account, it is referred to as 'stopping of account'.

Closing an Account: When a customer requests the banker in writing to close his account, the banker is bound to close the same. He(banker) should not ask the reasons and the customer is required to return the unused cheques.

A customer may get his account closed by withdrawing the balance standing to his credit or liquidating the outstandings in his account. An account cannot be treated as closed even if it shows 'nil' balance, until and unless the customer's request/direction to that effect has been received. The account may be closed even if the unused cheques are not returned. However, efforts should be continued to recover unused cheque leaves.

Stopping an account: A banker may take steps to stop his customer's account, which is found to be undesirable. The banker must give due notice to the customer, of his intention to close the account and request him to withdraw the balance standing to his credit. The banker takes such extreme step to stop his customer's account under the following circumstances:

(i) Mis-use;

(ii) account

(iii) Insanity of customer

(iv) Insolvency of customer

(v) Death of customer

(vi) Garnishee order and

(vii) Assignment.

i) Mis-use: When the customer is guilty of misusing the account viz. forging cheques, bills of exchange, issuing cheques without sufficient balance, failure to pay back (repay) loans, overdrafts etc.

ii) Un-operated account :When an account of his customer remains un-operated for a long time, the banker may presume that he needs no longer the account and communicate him to withdraw the amount. Despite reasonable efforts, if the customer has not been traced, the banker may transfer the balance at his credit to an "unclaimed deposit account' and the account is closed. The balance shall be paid to the customer, as and when, he is traced. 

iii) Insanity of customer: When a banker receives notice regarding insanity of his customer, he has to stop payments against the account.

iv) Insolvency of customer :If the customer becomes insolvent, he is deprived of operating the account. The banker has to transfer the balance (standing to customer's account) to the Official Receiver of the insolvent customer.

v) Death of customer :When the customer dies, the banker must stop operation of his customer's account.

vi) Garnishee order: When the banker receives a Garnishee Order from the court, he is bound to suspend the operation of his customer's account.

vii) Assignment: Assignment simply means transfer, when the banker receives a notice of assignment of the credit balance of his customer's account to a third party, the banker is bound to pay/transfer the same to such third party.