BANKING AFFAIRS

Detailed explanation-1: -Banker’s discretion. In order to cover a loan in default, a bank has a legal right to seize funds of a guarantor or the debtor. A settlement of mutual debt between a creditor and a debtor through offsetting transaction claims is also known as setoff.

Detailed explanation-2: -The banker’s right of lien extends over goods and securities handed over to him. Money deposited in the bank and credit balance in his/her account does not fall in the category of goods and securities. Therefore the banker can use his right of setoff as opposed to lien with regard to money deposited with him.

Detailed explanation-3: -A bank has a right to set off a debt owing to a customer against a debt due from him. From a commercial standpoint, a right of set-off is a form of security (right) for a lender.

Detailed explanation-4: -The banker can exercise his right of lien on all goods and securities entrusted to him in the capacity as a banker. The Banker cannot exercise his right of lien in respect of : the goods and securities entrusted to him as a trustee or an agent; and. the goods and securities entrusted to him for some specific purpose.

Detailed explanation-5: -The primary general relationship arises from a contract between the two i.e. banker and a customer. So it is a contractual relationship. It is governed by the various terms of agreement between the two parties.