1. Rights and obligations
Banks offer a wide range of financial products and services to satisfy the varying financial services needs of their target customer. It also has become essential for them to deliver these products and services backed by a high standard of customer service. It is important to note that a bank is also a business organisation and like any other business it needs to make profits for its stakeholders. A bank therefore conducts business in such a manner that it balances the responsibilities it has to its customers against its responsibilities to its shareholders and employees.
A bank believes its products and services, are competitive and represents fair value to its customers. It is up to you to select the correct mix of products and services which would satisfy your personal needs both for functionality as well as price. You must make informed decisions after making inquiries having regard to your particular choices. Banks are happy to assist you with inquiries you may have by providing all the information about their products and services.
2. The contractual relationship
When you become a customer of a bank, with it you automatically enter into a contractual relationship. You need to bear in mind that in addition to the explicit written terms there may be implied terms relating to ordinary banking business. The type of banking service you seek is also relevant. Your contract with your bank will also governed by your relationship with your bank.
For example, it is a debtor and creditor relationship with a loan or deposit account. For a deposit account the bank owes you the balance in your account and therefore it is your debtor. For a loan account you owe the bank the balance outstanding and your bank is your creditor. When your bank collects a cheque for the credit of your account, you are the principal and the bank is your agent
You may open accounts in your name only as an individual account, or with one or more others as a joint account. Your relationship will usually start when you open an account with your bank. However, it may be even earlier, for example, when your bank provides financial services to you even before opening your account.
3. Banking regulations
Many legal enactments including the Banking Act, Monetary Law Act, Consumer Affairs Authority Act and the Bills of Exchange Ordinance govern the business of banking Central Bank of Sri Lanka is the principal regulatory authority for banks. However, there are others such as the Consumer Affairs Authority which has power to regulate on certain banking business activities
In pursuance of good governance, with the concurrence of the Central Bank of Sri Lanka, a scheme called the “Financial Ombudsman, Sri Lanka” has been established. The Financial Ombudsman has the power to inquire into and settle any complaints and disputes between individual customers and the financial institutions covered by the Ombudsman Scheme.
4. General obligations of banks to you as a customer
Your bank owes a duty of care when opening accounts to make proper enquiries. It is a legal requirement for the bank to identify you and your financial profile.
Your bank has duty of secrecy in respect of transactions and information on your account. However, this duty is not absolute and there are some exceptions. Your bank may disclose information when you have expressly or impliedly consented, when demanded by a court order, where there is a public duty to do so or, in order to safeguard the bank’s own interest.
In view of safeguarding the interests of the bank, building a healthy relationship between customers and banks ensures customer confidence and stability in the banking sector. The Central Bank has also issued a Direction, mandating a ‘Customer Charter’ to be followed by licensed banks.
The key requirements to be fulfilled by banks, as set out in the Charter are as follows:
a)Providing factual information to customers; e.g., description of the products/services; financial and other benefits; fees and charges; commissions; interest rates; procedures to be followed; major terms and conditions; complaint procedures and relief; restrictions on accounts and transactions; compensations on pre-mature withdrawal/termination or cancellation of products/services by banks or by customers; procedures to be followed on foreclosure of properties.
b)Providing information in languages preferred by customers i.e., Sinhala, Tamil or English.
c)Assisting customers to fully understand the “Terms & Conditions’ on products/services.
d)Providing factual information to customers in all advertisements in any media and promotional materials, and further clarification or information on those advertisements, if required.
e)Displaying information such as interest rates, foreign exchange rates, contact details of the Financial Ombudsman, banking hours and holidays, in the head offices, branches and other banking outlets.
f)Improving customer awareness on financial products/services.
g)Protecting customers from any harassment, abusive debt collection practices, disclosure of personal information to others, by agents appointed by banks.
h)Assisting elderly, differently-abled, or customers with low financial literacy, to have fair access to banking services.
5. General obligations you owe to your bank
You have a general duty to your bank to ensure that instructions you provide on payment of funds is clear and unambiguous. You must exercise reasonable care in making out cheques so that bank is not misled and forgery is not facilitated. You must notify your bank immediately you become aware of any forgeries or frauds, including unauthorised transactions on your account.
You generally do not have a duty to inspect statements of your account to discover any unauthorised transactions. However, it is in your own interest to scrutinise your account statement immediately on receipt and notify your bank of any entries which you believe are incorrect, unauthorised or not appearing therein.
The ‘Customer Charter’ referred to above also incorporates certain customer obligations towards banks. Customers should foster the relationship with banks fulfilling their obligations.
In this regard:
a)Customers should not borrow beyond their affordable repayment capacity limit.
b)Customers should not allow the repayments or instalments to go into arrears and the prompt repayments will create healthy relationships with the banks.
c)If a customer wants to settle his/her loan before the end of the loan period, he/she has to pay certain amount of money over the loan amount as agreed at the time of accepting the offer.
d)If the customer is unable to repay his/her loan outstanding as agreed, the bank will have the right to recover the amount owing to the bank including the bank’s expenses specified in the ‘Terms & Conditions’.
e)If a customer finds himself/herself in financial difficulties, he/she should let the bank know as early as possible. The sooner the bank discusses the customer’s problems, the easier it will be for both of the customer and the bank to find a solution.
f)When a customer account goes into default, the first step the bank takes is to contact the customer. In this regard, it is imperative that the customer should inform the bank at all times of any changes to his/her address and contact details.
g)Customers should have the full knowledge and understanding of the product/service offered before entering into the contract.
h)Customers should duly fill and submit the required application forms and supporting documents in time.
i)Customers should exercise due care in all transactions with banks.
j)Customers should notify the bank promptly of any seven fraudulent transaction/s or such attempts in their accounts with the banks whenever they become aware of such instances.
k)Customers should exercise utmost care in using and storing/handling Personal Identification Numbers (PIN) and security measures of other electronic cards issued by the bank.
l)Customers should not treat any operational lapse of a bank on its obligations mentioned in Clause 2 to 7 above other than any dispute on the amount payable to the bank as a reason for his/her non settlement or delay in settlement of a debt unless otherwise allowed by a court of law. All such incidents need to be resolved separately or individually.