BANKER AS A BAILOR / BAILEE :

Section 148 of Indian Contract Act,1872, defines bailment, bailor, and bailee. A bailment is the delivery of goods by one person to another for some purpose upon a contract. As per the contract, the goods should when the purpose is accomplished, be returned or disposed off as per the directions of the person delivering the goods. The person delivering the goods is called the bailer and the person to whom the goods are delivered is called the bailee.

Banks secure their loans and advances by obtaining tangible securities. In certain cases banks hold the physical possession of secured goods (pledge) – cash credit against inventories; valuables – gold jewels (gold loans); bonds and shares (loans against shares and financial instruments) In such loans and advances, the collateral securities are held by banks and the relationship between banks and customers are that of bailee (bank) and bailer.(borrowing customer)