RBI/2004-05/490
DBOD.No.Leg. BC.95 /09.07.005/2004-05
June 09, 2005
To
The Chairman/CEOs of All the Scheduled Commercial Banks
(Excluding RRBs)
Dear Sir,
Settlement of claims in respect of deceased depositors
– Simplification of Procedure
Pursuant to the announcement in the Mid-Term
Review of the Annual Policy of the RBI on November 3, 2003, the Committee
on Procedure and Performance Audit on Public Services (CPPAPS) was constituted
by the RBI with a view to improving the quality of public services to the common
person. The Committee in its Report No.3 on 'Banking Operations : Deposit Accounts
and Other Facilities Relating to Individuals (Non-Business)', observed that
the tortuous procedures, particularly those applicable to the family of a deceased
depositor, caused considerable distress to such family members. While the instruction
regarding settlement of claims of the deceased depositors had been issued to
the banks vide our circular No.DBOD.BC.148/09.07.007/99-2000 dated March 14,
2000 and BC.56/09.07.007/2000-01 dated December 6, 2000, the present dispensation
has been reviewed in the light of the recommendations of the CPPAPS and the
following instructions are being issued, in supersession of all the earlier
instructions on the subject, to facilitate expeditious and hassle-free settlement
of claims on the death of a depositor.
2. ACCESS TO BALANCE IN DEPOSIT ACCOUNTS
(A) Accounts with survivor/nominee clause
2.1 As you are aware, in the case of deposit
accounts where the depositor had utilized the nomination facility and made a
valid nomination or where the account was opened with the survivorship clause
('either or survivor', or 'anyone or survivor', or 'former or survivor' or 'latter
or survivor'), the payment of the balance in the deposit account to the survivor(s)/nominee
of a deceased deposit account holder represents a valid discharge of the bank's
liability provided :
a. the bank has exercised due care and caution
in establishing the identity of the survivor(s) / nominee and the fact of death
of the account holder, through appropriate documentary evidence;
b. there is no order from the competent court
restraining the bank from making the payment from the account of the deceased;
and
c. it has been made clear to the survivor(s) / nominee that he
would be receiving the payment from the bank as a trustee of the legal heirs of
the deceased depositor, i.e., such payment to him shall not affect the right or
claim which any person may have against the survivor(s) / nominee to whom the
payment is made.
2.2 It may be noted that since payment made
to the survivor(s) / nominee, subject to the foregoing conditions, would constitute
a full discharge of the bank's liability, insistence on production of legal
representation is superfluous and unwarranted and only serves to cause entirely
avoidable inconvenience to the survivor(s) / nominee and would, therefore, invite
serious supervisory disapproval. In such case, therefore, while making payment
to the survivor(s) / nominee of the deceased depositor, the banks are advised
to desist from insisting on production of succession certificate, letter of
administration or probate, etc., or obtain any bond of indemnity or surety from
the survivor(s)/nominee, irrespective of the amount standing to the credit
of the deceased account holder.
(B) Accounts without the survivor/nominee
clause
2.3 In case where the deceased depositor had
not made any nomination or for the accounts other than those styled as 'either
or survivor' (such as single or jointly operated accounts), banks are advised
to adopt a simplified procedure for repayment to legal heir(s) of the depositor
keeping in view the imperative need to avoid inconvenience and undue hardship
to the common person. In this context, banks may, keeping in view their risk
management systems, fix a minimum threshold limit, for the balance in the account
of the deceased depositors, up to which claims in respect of the deceased depositors
could be settled without insisting on production of any documentation other
than a letter of indemnity.
3. Premature Termination of term deposit accounts
In the case of term deposits, banks are advised
to incorporate a clause in the account opening form itself to the effect that
in the event of the death of the depositor, premature termination of term deposits
would be allowed. The conditions subject to which such premature withdrawal
would be permitted may also be specified in the account opening form. Such premature
withdrawal would not attract any penal charge.
4. Treatment of flows in the name of the
deceased depositor
In order to avoid hardship to the survivor(s)
/ nominee of a deposit account, banks are advised to obtain appropriate agreement
/ authorization from the survivor(s) / nominee with regard to the treatment
of pipeline flows in the name of the deceased account holder. In this regard,
banks could consider adopting either of the following two approaches:
- The bank could be authorized by the survivor(s) / nominee
of a deceased account holder to open an account styled as 'Estate of Shri
________________, the Deceased' where all the pipeline flows in the name of
the deceased account holder could be allowed to be credited, provided no withdrawals
are made.
OR
- The bank could be authorized by the survivor(s) / nominee
to return the pipeline flows to the remitter with the remark 'Account holder
deceased' and to intimate the survivor(s) / nominee accordingly. The survivor(s)
/ nominee / legal heir(s) could then approach the remitter to effect payment
through a negotiable instrument or through ECS transfer in the name of the
appropriate beneficiary.
5. Access to the safe deposit lockers / safe
custody articles
For dealing with the requests from the nominee(s)
of the deceased locker-hirer / depositors of the safe-custody articles (where
such a nomination had been made) or by the survivor(s) of the deceased (where
the locker / safe custody article was accessible under the survivorship clause),
for access to the contents of the locker / safe custody article on the death
of a locker hirer / depositor of the article, the banks are advised to adopt
generally the foregoing approach, mutatis mutandis, as indicated for
the deposit accounts. Detailed guidelines in this regard are, however, being
issued separately.
6. Time limit for settlement of claims
Banks are advised to settle the claims in respect
of deceased depositors and release payments to survivor(s) / nominee(s) within
a period not exceeding 15 days from the date of receipt of the claim subject
to the production of proof of death of the depositor and suitable identification
of the claim(s), to the bank's satisfaction.
Banks should report to the Customer Service
Committee of the Board, at appropriate intervals, on an ongoing basis, the details
of the number of claims received pertaining to deceased depositors / locker-hirers
/ depositors of safe custody article accounts and those pending beyond the stipulated
period, giving reasons therefor.
7. Provisions of the Banking Regulation Act,
1949
In this connection, attention is also invited
to the provisions of Sections 45 ZA to 45 ZF of the Banking Regulation Act,
1949 and the Banking Companies (Nomination) Rules, 1985.
8. Simplified operational systems / procedures
The Indian Banks' Association (IBA) has been
advised to formulate a Model Operational Procedure (MOP) for settlement of claims
of the deceased constituents, under various circumstances, consistent with the
instructions contained in this circular, for adoption by the banks. The banks
are, therefore, advised to undertake a comprehensive review of their extant
systems and procedures relating to settlement of claims of their deceased constituents
(i.e., depositors / locker-hirers / depositors of safe-custody articles) with
a view to evolving a simplified policy / procedures for the purpose, with the
approval of their Board, taking into account the applicable statutory provisions,
foregoing instructions as also the MOP to be formulated by the IBA.
9. Customer Guidance and Publicity
Banks are advised to give wide publicity and
provide guidance to deposit account holders on the benefits of the nomination
facility and the survivorship clause. Illustratively, it should be highlighted
in the publicity material that in the event of the death of one of the joint
account holders, the right to the deposit proceeds does not automatically devolve
on the surviving joint deposit account holder, unless there is a survivorship
clause.
10. These instructions should be viewed
as very critical element for bringing about significant improvement in the quality
of customer service provided to survivor(s) / nominee(s) of deceased depositors.
11. Please acknowledge receipt.
Yours faithfully,
(Anand Sinha)
Chief General Manager-in-Charge