1. Introduction
Acceptance of deposits and maintenance
of deposit accounts is the core activity in any bank. The very basic legal interpretation
of the word 'banking' as defined in the Banking Regulation Act, 1949 means accepting
deposits of money, for the purpose of lending or investment, from the public,
repayable on demand or otherwise, and withdrawable by cheque, draft, order or
otherwise. Thus, deposits are the major resource and mainstay of a bank and
the main objective of a bank is to mobilise adequate deposits. Various instructions,
guidelines, etc. issued from time to time to primary (urban) co-operative banks
in regard to opening and conduct/monitoring of deposit accounts are detailed
hereunder.
2. Opening of Deposit Accounts
2.1 Introduction of New Depositors
A large number of frauds are perpetrated
in banks mainly through opening of accounts in fictitious names, irregular payment
of cheques, manipulation of accounts and unauthorised operations in accounts.
Considering the fact that opening of an account is the first entry point for
any person to become a customer of the bank, utmost vigilance in opening of
accounts and operations in the accounts is called for. Even the legal protection
under the Negotiable Instruments Act, 1881 which governs payment and collection
of negotiable instruments and provides certain rights, liabilities (obligations)
and protections to the issuers/drawers, payees, endorsees, drawees, collecting
banks and paying/drawee banks, will be available, only if the bank makes the
payment or receives payment of a cheque/draft payable to order in due course.
Any payment or collection of a negotiable instrument is deemed in due course
only when the bank acts in good faith and without negligence and
does so for a customer.
2.1.1 Necessity of Introduction
(i) Introduction of an account
is obtained not merely as a formality to get protection under section 131 of
the Negotiable Instruments Act 1881, but also to enable proper identification
of the person opening an account, so that it would be possible, to trace the
person later when required.
(ii) It is necessary for banks
to know their customers and to put in place proper systems and procedures. The
practice of obtaining proper introduction should not be treated as a mere formality,
but as a measure of safe-guard against opening of accounts by undesirable persons
or in fictitious names with a view, inter alia, to depositing unaccounted
money.
2.1.2 Proper Introduction
(i) The account should not be
normally opened without a meeting between the bank official and the customer.
(ii) The banks should invariably
insist upon prospective depositors to furnish introduction (from either any
of the existing account holders or a respectable member of the local community
known to the bank or the bank's staff) for opening not only current and cheque
operated savings bank accounts but also all deposit accounts including call,
short-term and fixed deposits. The banks should take steps to satisfy themselves
about the identity of their depositors.
(iii) The role of the introducers
should be made more specific. It is not sufficient to state that he has known
the person for a sufficient length of time.
(iv) The person giving introduction
should be of some standing and have an account with the bank for at least
six months to ensure that the accounts are not opened on the introduction of
new account holders or persons having small and marginal balances. The interval
will also enable the bank to monitor the account closely to satisfy itself that
the transactions in the introducer's account are satisfactory.
(v) Branch Managers/staff members
should be discouraged from giving the introduction.
(vi) Where the party is not able to provide an
introduction satisfactorily, it must be made incumbent upon him to provide sufficient
proof of his antecedents before the account is allowed to be opened.
(vii) Customers of good standing
should be educated to realise the implications of introducing an account without
knowing the new parties.
(viii) In the case of a customer
who will be getting credits, say by way of salary, and making payments by cheques
to government/ semi-government agencies/individuals, simple introduction along
with photograph, may suffice.
(ix) In case of accounts, which
are likely to be used for putting through remittance transactions and for collection
of cheques of substantial amounts besides business payments, deeper enquiries
would be necessary on the part of the bank.
2.1.3 Introduction in Absentia
When an introducer does not
personally call at the branch to introduce an account, the fact of having introduced
a new account should be got confirmed from him in writing.
In cases where the account
opening forms bear the signatures of manager/officials of other branches of
the bank for introduction, apart from verifying the signatures of such introducers
with the specimen signatures available on record, the branch concerned should
obtain written confirmation of the introduction from the officials of the branches
who introduced the account. Till such time the confirmation is received, the
banks should not collect cheques/draft through the newly opened accounts.
The same procedures should
be adopted in cases where the introducers of accounts are not officials of the
bank and do not personally call at the bank to introduce an account.
The bank should send a letter
by post both to the customer and the introducer and seek their confirmation
for opening the account/giving introduction. Cheque book may be issued after
receipt of confirmation from both.
2.2 Photographs of Account
Holders
2.2.1 Mandatory Obtention of
Photographs
(i) The banks should obtain photographs
of the depositors/account holders who are authorised to operate the accounts
at the time of opening of all new accounts. The customers' photographs should
be recent and the cost of photographs to be affixed on the account opening forms
may be borne by the customers.
(ii) Only one set of photographs
need be obtained and separate photographs should not be obtained for each category
of deposit. The applications for different types of deposit accounts should
be properly referenced.
(iii) Photographs of persons
authorised to operate the deposit accounts viz. S.B. and Current accounts should
be obtained. In case of other deposits viz. Fixed/Recurring, Cumulative etc.
photographs of all depositors in whose names the deposit receipt stands may
be obtained, except in the case of deposits in the name of minor, where guardians'
photographs could be obtained.
(iv) The banks should also
obtain photographs of 'Pardanashin' Women.
(v) The banks should also obtain
photographs of NRE, NRO, FCNR account holders.
For operations in the accounts,
banks should not ordinarily insist on the presence of account holder unless
the circumstances so warrant. Photographs cannot be a substitute for specimen
signatures.
2.2.2 Exceptions
(i) The photographs need not
be insisted upon by banks in the under noted cases:
(a) new savings bank accounts
where cheque facility is not provided; and
(b) fixed and other term deposits
upto an amount and inclusive of Rs. 10,000/-
(ii) However, the banks should
take usual and necessary precautions/safeguards in regard to opening and operation
of these accounts.
(iii) Where a depositor has
a term deposit of less than Rs. 10,000/- but he/she is also having a savings
bank account with cheque facility or a current account, it will be necessary
to have the photograph of the depositor.
(iv) Banks, local authorities
and government departments (excluding public sector undertakings or quasi-government
bodies) are exempt from the requirement of photographs.
(v) The photographs need not
be obtained for borrowal accounts viz. Cash Credit, Overdrafts accounts, etc.
(vi) The banks may not insist
for photographs in case of accounts of staff members (Single/Joint).
2.3 Address of Account Holders
It is not proper for banks even
unwittingly to allow themselves to be utilised by unscrupulous persons for the
purpose of tax evasion. Therefore, banks should obtain full and complete address
of depositors and record these in the books and the account opening forms so
that the parties could be traced without difficulty, in case of need. Independent
confirmation of the address of the account holder should be obtained in all
cases.
2.4 Other Safeguards
2.4.1 PAN/GIR Number
The banks are required to obtain
PAN/GIR number of a depositor opening an account with an initial deposit of
Rs.50,000/- and above.
2.4.2 Authorisation
The opening of new accounts should
be authorised only by the Branch Manager or by the Officer-in-Charge of the
concerned deposit accounts department at bigger branches.
2.4.3 Completion of Formalities
The banks should ensure that all
account opening formalities are undertaken at the bank's premises and no document
is allowed to be taken out for execution. Where it is absolutely necessary to
make exception of the above rule, banks may take precaution such as deputing
an officer to verify the particulars, obtaining a signed photograph on a suitably
formatted verification sheet, forwarding by registered A.D., mailing a copy
of the account opening form and accompanying instructions to the client for
necessary verification before any operations are conducted in the accounts.
2.4.4 Opening of current
account – Need for discipline:
While recognizing the role of primary
(urban) co-operative banks in providing basic and affordable banking services
in their respective area of operation, it is observed that in some UCBs, the
requirement of minimum balance continues to deter a sizeable section of population
from opening / maintaining bank accounts.
With a view to achieving the objective
of greater financial inclusion, all UCBs are advised to make available a basic
banking 'no-frills' account either with 'nil' or very low minimum balances
as well as charges that would make such accounts accessible to vast sections
of population. The nature and number of transactions in such accounts could
be restricted, but made known to the customer in advance in a transparent manner.
All UCBs are advised to give wide publicity to the facility of such 'no-frills'
account including on their web sites indicating the facilities and charges in
a transparent manner.
3 Restrictions on Opening OF Certain
Types of Deposit Accounts
3.1 Minor's Account with
Mother as Guardian
3.1.1 Generally, the banks are
reluctant to open deposit account in the name of minor, with mother as a guardian.
Presumably, reluctance to allow mother as a guardian when the father is alive,
is based on section 6 of the Hindu Minority and Guardianship Act, 1956 which
stipulates that, during his lifetime, father alone should be the natural guardian
of a Hindu minor.
3.1.2 The legal and practical
aspects of the problem have been examined by the Reserve Bank of India. If the
idea underlying the demand for allowing mothers to be treated as guardians related
only to the opening of fixed, recurring deposit and savings banks accounts,
notwithstanding the legal provisions, such accounts could be opened by banks
provided they take adequate safeguards in allowing operations in the accounts
by ensuring that minors' account opened with mothers as guardians are not allowed
to be overdrawn and that they always remain in credit. In this way, the minor's
capacity to enter into contract would not be a subject matter of dispute.
3.1.3 Further, in cases where
the amount involved is large, and if the minor is old enough to understand the
nature of the transaction, the banks could take his acceptance also for paying
out money from such account.
4. Nomination Facilities
4.1 The Act Provisions
Sections 45ZA to 45ZF of the Banking
Regulation Act, 1949 (As applicable to co-operative societies) provide, inter alia,
for the following matters:
(i) to enable a co-operative
bank to make payment to the nominee of a deceased depositor, of the amount standing
to the credit of the depositor.
(ii) to enable a co-operative
bank to return the articles left by a deceased person in its safe custody to
his nominee, after making an inventory of the articles in the manner directed
by the Reserve Bank.
(iii) to enable a co-operative
bank to release the contents of a safety locker to the nominee, of the hirer
of such locker, in the event of the death of the hirer after making an inventory
of the contents of the safety locker in the manner directed by the Reserve Bank.
4.2 The Rules
The Co-operative Banks (Nomination)
Rules, 1985 provide for:
(i) Nomination forms for deposit
accounts, articles kept in safe custody and the contents of safety lockers,
(ii) Forms for cancellation
and variation of the nomination,
(iii) Registration of nominations
and cancellation and variation of nominations, and matters related to the above.
4.3 Record of Nomination
4.3.1 The Rules 2(10), 3(9)
and 4(10) require a bank to register in its books the nomination, cancellation
and/or variation of the nomination. The banks should accordingly take action
to register nominations or changes therein, if any, made by their depositor(s)hirer(s)
of lockers.
4.3.2 The banks should ensure
that the nomination facilities are made available to their customers.
4.4 Nomination Facility for
Deposit Accounts
4.4.1 Legal Provisions
The legal provisions for nomination
and payment of depositor's money to the nominee and protection against notice
of claims of the other persons are detailed in Sections 45ZA and 45ZB.
4.4.2 Nomination Rules in
respect of Deposit Accounts
The Nomination Rules in respect
of Deposit Accounts provide as under:
- The nomination to be made by the depositor
or, as the case may be, all the depositors together in respect of a deposit
held by a co-operative bank to the credit of one or more individuals.
- The said nomination may be made only in respect
of a deposit, which is held in the individual capacity of the depositor
and not in any representative capacity as the holder of an office or otherwise.
- Where the nominee is a minor, the depositor
or, as the case may be, all the depositors together, may, while making the
nomination, appoint another individual not being a minor, to receive the
amount of the deposit on behalf of the nominee in the event of the death
of the depositor or, as the case may be, all the depositors during the minority
of the nominee.
- In the case of a deposit made in the name
of a minor, the nomination shall be made by a person-lawfully entitled to
act on behalf of the minor. .
- The cancellation of the said nomination to
be made by the depositor or, as the case may be, all the depositors together.
- A variation of the said nomination to be made
by the depositor or, as the case may be, all the depositors together.
- The said nomination shall be made in favour
of only one individual.
- A nomination, cancellation of nomination or
variation of nomination may be made as aforesaid at any time during which
the deposit is held by a co-operative bank to the credit of the depositor
or depositors, as the case may be.
- In the case of a deposit held to the credit
of more than one depositor, the cancellation or variation of a nomination
shall not be valid unless it is made by all the depositors surviving at
the time of the cancellation or variation of the nomination.
- The co-operative bank shall acknowledge in
writing, to the concerned depositor or depositors the filing of the relevant
duly completed Form of nomination or cancellation of nomination or variation
of nomination, as the case may be, in respect of a deposit.
- The relevant duly completed Form of Nomination
or cancellation of nomination or variation of nomination filed with the
co-operative bank shall be registered in the books of the co-operative bank.
- A nomination or cancellation of nomination
or variation of nomination shall not cease to be in force merely by reason
of the renewal of the deposit.
4.4.3 Operational Instructions
- Nomination facility should be made available
to all types of deposit accounts irrespective of the nomenclature used by
different banks.
- Unless the customer prefers not to nominate,
(this may be recorded, without giving scope for conjecture of non-compliance)
nomination should be a rule, to cover all existing and new accounts.
- Nomination facility is available for saving
bank accounts opened for credit of pension. However, Co-operative Societies
(Nomination) Rules, 1985, are distinct from the Arrears of Pension (Nomination)
Rules, 1983, and the nomination exercised by the pensioner under the latter
Rules for receipt of arrears of pension will not be valid for the purpose
of deposit accounts held by the pensioners with banks for which a separate
nomination is necessary in terms of Co-operative Societies (Nomination)
Rules, 1985, in case a pensioner desires to avail of nomination facility.
- In addition to obtaining nomination form,
banks may provide for mentioning name and address of the nominee in the
account opening form. Publicity about nomination facility is needed, including
printing compatible message on chequebook, passbook and any other literature
reaching the customer as well as launching periodical drives to popularise
the facility.
- In case of joint deposits, after the death
of one of the depositors, the banks may allow variation/cancellation of
a subsisting nomination by other surviving depositor (s) acting together.
This is also applicable to deposits having operating instructions "either
or survivor". It may be noted that in the case of a joint deposit account,
the nominee’s right arises only after the death of all the depositors.
- The banks may introduce a practice of recording
on the face of the pass book the position regarding availment of nomination
facility with the legend ‘Nomination Registered’. This may be done in the
case of term deposit receipts also.
4.5 Nomination Facility
in respect of Articles in Safe Custody
4.5.1 Legal Provisions
The legal provisions providing
for nomination and return of articles kept in safe custody to the nominee and
protection against notice of claims of other persons are detailed in Sections
45ZC and 45ZD.
4.5.2 Nomination Rules
in respect of Articles in Safe Custody
The Nomination Rules in respect
of articles kept in safe custody provides as under:
(a) The nomination to be made
by an individual (hereinafter referred to as the "depositor") in respect
of articles left in safe custody with a co-operative bank.
(b) Where the nominee is minor,
the depositor may, while making the nomination, appoint another individual not
being a minor, to receive the said articles on behalf of the nominee in the
event of the death of the depositor during the minority of the nominee.
(c) Where the articles are left
in safe custody with a co-operative bank in the name of a minor, the nomination
shall be made by a person lawfully entitled to act on behalf of the minor.
(d) The nomination should be made
in favour of only one individual.
(e) A nomination, cancellation
of nomination or variation of nomination may be made by the depositor at any
time during which the articles so deposited are held in safe custody by the
co-operative bank.
(f) The co-operative bank should
acknowledge in writing, to the depositor, the filing of the relevant duly completed
Form of nomination or cancellation of nomination or variation of nomination,
as the case may be, in respect of the articles so deposited.
(g) The duly completed Form of
nomination or cancellation of nomination or variation of nomination filed with
the co-operative bank should be registered in the books of the co-operative
bank.
4.5.3 Operational
Instructions
(i) Nomination facilities are
available only in the case of individual depositors and not in respect of persons
jointly depositing articles for safe custody.
(ii) While returning articles kept
in safe custody to the nominee or nominees and surviving hirers, banks are not
required to open sealed/closed packets left with them for safe custody while
releasing them.
(iii) In the matter of returning
articles left in safe custody by the deceased depositor to the nominee, the
Reserve Bank of India, in pursuance of sections 45ZC(3) and 45ZE(4), read with
section 56, of the Banking Regulation Act, 1949, has specified the formats for
the purpose.
(iv) In order to ensure that the
articles left in safe custody are returned to the genuine nominee, as also to
verify the proof of death, co-operative banks may devise their own claim formats
or follow the procedure, if any, suggested for the purpose either by their own
federation/association or by the Indian Banks' Association. As regards proof
of death of depositor, the IBA has advised its member banks to follow the procedures
as prevalent in banks viz. production of the death certificate or any other
satisfactory mode of proof of death.
4.6 Nomination in respect of
Safe Deposit Locker Accounts
4.6.1 Legal Provisions
The legal provisions providing
for nomination and release of contents of safety lockers to the nominee and
protection against notice of claims of other persons are detailed in Sections
45ZE and 45ZF of the Act ibid.
4.6.2 The Nomination Rules in
respect of Safety Locker
The Nomination Rules in respect
of Safety Lockers provide as under:
(a) Where the locker is hired
from a co-operative bank by two or more individuals jointly, the nomination
to be made by such hirers.
- In the case of a sole hirer of a locker, nomination
shall be made in favour of only one individual.
- Where the locker is hired in the name of a
minor, the nomination shall be made by a person lawfully entitled to act
on behalf of the minor.
- The cancellation of the said nomination to
be made by the sole hirer or, as the case may be, joint hirers of a locker.
- A variation of the said nomination to be made
by the sole hirer of a locker.
- A variation of the said nomination to be made
by the joint hirers of a locker.
- A nomination, cancellation of nomination or
variation of nomination may be made as aforesaid at any time during which
the locker is under hire.
- A co-operative bank shall acknowledge in writing
to the sole hirer or joint hirers, the filling of the relevant duly completed
Form of nomination or cancellation of nomination or variation of nomination,
as the case may be, in respect of the locker so hired.
- The relevant duly completed Form of nomination
or cancellation of nomination or variation of nomination filed with the
co-operative bank shall be registered in the books of the co-operative bank.
4.6.3 Operational Instructions
(i) In the matter of allowing the
nominee(s) to have access to the locker and permitting him/them to remove the
contents of the locker, the Reserve Bank of India, in pursuance of sections
45ZC(3) and 45ZE (4), read with section 56, of the Banking Regulation Act, 1949,
has specified the Formats for Banking Regulation Act, 1949.
(ii) In order to ensure that the
amount of deposits, articles left in safe custody and contents of lockers are
returned to the genuine nominee, banks may take action as indicated in para
4.5.3 (iv) above.
(iii) While releasing contents
of lockers to the nominee or nominees and surviving hirers, banks are not required
to open sealed/closed packets found in locker.
(iv) As regards locker hired jointly,
on the death of any one of the joint hirers, the contents of the locker are
only allowed to be removed (jointly by the nominee and the survivors) after
an inventory is taken in the prescribed manner. In such a case, after such removal
preceded by an inventory, the nominee and surviving hirer(s) may still keep
the entire contents with the same bank, if they so desire by entering into a
fresh contract of hiring a locker.
(v) Section 45ZE, read with section
56, of the Banking Regulation Act, 1949, does not preclude a minor from being
a nominee for obtaining delivery of the contents of a locker. However, the responsibility
of the banks in such cases is to ensure that when the contents of a locker are
sought to be removed on behalf of the minor nominee, the articles are handed
over to a person who, in law, is competent to receive the articles on behalf
of the minor.
5 Operations in Accounts
5.1 Joint Accounts
5.1.1 Modes of Operations
in Joint Accounts
A copy of the letter No. LA.C/19-96-29
dated 28 August 1980, received from the Indian Banks’ Association, Bombay is
given in the Annex I. Banks may consider the desirability of issuing
suitable instructions to their branches for their information and necessary
guidance on the subject.
5.1.2 Precautions in Opening
Joint Accounts
(i) In the case of too many
joint account holders, the banks should keep the following guidelines in view,
while opening joint accounts and permitting operations thereon:
(a) While there are no restrictions
on the number of account holders in a joint account, it is incumbent upon the
banks to examine, every request for opening joint accounts very carefully. In
particular, the purpose, nature of business handled by the parties and other
relevant aspects relating to the business, and the financial position of the
account holders, need to be looked into before opening such accounts. Care has
also to be exercised when the number of account holders is large.
(b) The account payee cheques payable
to third parties should not be collected.
(c) Cheques that are "crossed generally"
and payable to 'order' should be collected only on proper endorsement by the payee.
(d) Care should be exercised in
collection of cheques for large amounts.
(e) The transactions put through
in joint accounts should be scrutinised by the banks periodically and action
taken as may be appropriate in the matter. Care should be exercised to ensure
that the joint accounts are not used for benami transactions.
(ii) The internal control and vigilance
machinery should be tightened to cover the above aspects relating to the opening
and operation of joint accounts.
5.2 Monitoring Operations
in New Accounts
5.2.1 A system of maintaining
a close watch over the operations in new accounts should be introduced. While
at branches, primarily the responsibility for monitoring newly opened accounts
would rest with the in-charges of the concerned Department/Section, the Branch
Managers or the Managers of Deposit Accounts Department at larger branches should
at least for the first six months, from the date of opening of such accounts,
keep a close watch, so as to guard against fraudulent or doubtful transactions
taking place therein. If any transaction of suspicious nature is revealed, banks
should enquire about the transaction from the account holder, and if no convincing
explanation is forthcoming, they should consider reporting such transactions
to the appropriate investigating agencies.
5.2.2 Caution should be exercised
whenever cheques/ drafts for large amounts are presented for collection, or
Telegraphic Transfers (TTs)/Mail Transfers (MTs) are received for credit of
new accounts immediately/within a short period after opening of account. In
such cases, genuineness of the instruments and the account holder should be
thoroughly verified. If necessary the paying bank should check with the collecting
bank about the genuineness of any large value cheques/drafts issued. Demand
Drafts (DDs)/Cheques for large amounts presented for collection should be verified
under ultra violet lamps to safe guard against chemical alterations.
5.3 Monitoring Operations
in all Accounts
5.3.1 A system of close monitoring
of cash withdrawal for large amounts should be put in place. Where third party
cheques, drafts, etc. are deposited in the existing and newly opened accounts
followed by cash withdrawals for large amounts, the banks should keep a proper
vigil over the requests of their clients for such cash withdrawals for large
amounts.
5.3.2 The banks should introduce
a system of closely monitoring cash deposits and withdrawals for Rs. 5 lakh
and above not only in deposit accounts but also in all other accounts like cash
credit/overdraft etc. The banks/branches should also maintain a separate register
to record details of individual cash deposits and withdrawals for Rs. 5 lakh
and above. The details recorded should include, in the case of deposits, the
name of the account holder, account number, amount deposited and in the case
of withdrawals, the name of the account holder, account number, amount of withdrawal
and name of the beneficiary of the cheque. Further, any cash deposits or withdrawals
of Rs. 5 lakh and above should be reported by the Branch Manager to the Head
Office on a fortnightly basis along with full particulars, such as name of the
account holder, account number, date of opening the account, etc. On receipt
of these statements from branches, the Head Office should immediately scrutinise
the details thereof and have the transactions looked into by deputing officials,
if the transactions prima facie appear to be dubious or giving rise to suspicion.
The inspecting officials from the Reserve Bank of India during the course of
their inspections will also be looking into the statements submitted by the
branches.
5.3.3 The other important areas
in the payment of cheques wherein due caution need to be exercised are verification
of drawer's signature, custody of specimen signature cards, supervision over
issue of cheque books and control over custody of blank cheque books/leaves.
While need for examining cheques for large amounts under Ultra Violet Ray Lamps
is recognised by all banks, in practice it is rarely done as there is often
a tendency to be lax in the matter resulting in avoidable loss. In addition,
due care should be exercised in regard to issue and custody of tokens, movement
of cheques tendered across the counter and custody of all instruments after
they are paid by the banks. Depositors/ Customers should be asked to surrender
unused cheque books before closing/transferring the accounts. Also safe custody
of specimen signature cards is of utmost importance, especially when operating
instructions are changed, the change should be duly verified by a senior official
in the branch.
5.4 Issue of Cheque Books
Fresh cheque books should be issued
only against production of duly signed requisition slips from previous cheque
book issued to the party. In case the cheque book is issued against a requisition
letter, the drawer should be asked to come personally to the bank or cheque
book should be sent to him under registered post directly without being delivered
to the bearer. Loose cheques should be issued to account holder only when they
come personally with a requisition letter and on production of passbooks.
5.5 Dormant Accounts
The accounts which have not been
operated upon over a period two years should be segregated and maintained in
separate ledgers. The relative ledger(s) and the specimen signature cards should
be held under the custody of the Manager or one of the senior officials. The
first withdrawal in such segregated accounts should be allowed only with the
approval of the Manager.
5.6 Operation of Banks Accounts
by Old/Sick/Incapacitated Customers
5.6.1 In order to facilitate
old/sick/incapacitated bank customers to operate their bank accounts, procedure
as laid down in para 5.6.2 below may be followed. The cases of sick/old/incapacitated
account holders fall into the following categories:
(i) an account holder who is too
ill to sign a cheque/cannot be physically present in the bank to withdraw money
from his bank account but can put his/her thumb impression on the cheque/withdrawal
form, and
(ii) an account holder who is not
only unable to be physically present in the bank but is also not even able to
put his/her thumb impression on the cheque/withdrawal form due to certain physical
defect/incapacity.
5.6.2 The banks may follow the
procedure as under:
- Wherever thumb or toe impression of the sick/old/incapacitated
account holder is obtained, it should be identified by two independent witnesses
known to the bank, one of whom should be a responsible bank official.
- Where the customer cannot even put his/her
thumb impression and also would not be able to be physically present in
the bank, a mark obtained on the cheque/withdrawal form which should be
identified by two independent witnesses, one of whom should be a responsible
bank official.
5.6.3 In such cases, the customer
may be asked to indicate to the bank as to who would withdraw the amount from
the bank on the basis of cheque/withdrawal form as obtained above and that person
should be identified by two independent witnesses. The person who would be actually
drawing the money from the bank should be asked to furnish his signature to
the bank.
5.6.4 In this context, according
to an opinion obtained by the Indian Banks' Association from their consultant
on the question of opening of a bank account of a person who had lost both his
hands and could not sign the cheque/withdrawal form, there must be physical
contact between the person who is to sign and the signature or the mark put
on the document. Therefore, in the case of the person who has lost both his
hands, the signature can be by means of a mark. This mark can be placed by the
person in any manner. It could be the toe impression, as suggested. It can be
by means of mark which anybody can put on behalf of the person who has to sign,
the mark being put by an instrument which has had a physical contact with the
person who has to sign.
5.7 Receipt of Foreign Contributions
by various Associations/ Organisations in India under Foreign Contribution (Regulation)
Act, 1976
5.7.1 The Foreign Contribution
(Regulation) Act, requires that the associations having a definite cultural,
economic, educational, religious and social programme and receiving foreign
contribution should get themselves registered with the Ministry of Home Affairs,
Government of India and receive foreign contribution only through such one of
the branches of a bank, as an association may specify in its application for
registration with the Ministry of Home Affairs.
5.7.2 Further, the said Act provides
that every association referred to in sub-section (1) of Section (6) may, if
it is not registered with the Central Government, accept any foreign contribution
only after obtaining prior permission of the Central Government.
5.7.3 There are also certain organisations
of a political nature, not being political parties (including their branches/units)
specified by the Central Government under Section 5(l) of the Act. These organisations
require prior Permission of the Central Government for accepting any foreign
contribution. In this regard, the banks should take the following precautions:
(i) To afford credit of the proceeds
of cheques/drafts representing foreign contribution only if the association
is registered with the Ministry of Home Affairs, Government of India.
(ii) To insist on production
of a communication from the Ministry of Home Affairs conveying prior permission
of the Central Government for acceptance of specific amount of foreign contribution
in case the association is not registered under the Foreign Contribution (Regulation)
Act, 1976.
(iii) Not to afford credit to the
account of such associations as are not registered with the Ministry of Home
Affairs separately for the purpose of accepting foreign contribution under the
Foreign Contribution (Regulation) Act, 1976.
(iv) Not to afford credit to the
account of such associations as have been directed to receive foreign contributions
only after obtaining prior permission of the Central Government.
(v) Not to allow the credit
of the proceeds of the cheques/ demand drafts etc. to the organisations of a
political nature, not being political parties (including their branches and
units) unless a letter containing the prior permission of the Central Government
under the Foreign Contribution (Regulation) Act, 1976 is produced by such organisations.
(vi) To note the registration
number as conveyed by the Ministry of Home Affairs to the various associations
in the relevant records particularly the pages of the ledgers in which the foreign
contribution accounts of associations are maintained to ensure that no unwanted
harassment is caused to such associations.
(vii) In case any cheque/demand
draft has been tendered to the bank for realisation of its proceeds and credit
to the account of the association/organisation by an association or organisation
which is not registered or which requires prior permission, as the case may
be, the concerned branch of the bank may approach the Ministry of Home Affairs
for further instructions. In no case the banks should credit the account of
association/organisation of a political nature, not being a political party,
as specified by the Central Government and of an unregistered association, unless
the association/ organisation produces a letter of the Ministry of Home Affairs
conveying permission of the Central Government to accept the foreign contribution.
(viii) Where prior permission has
been granted such permission is to accept only the specific amount of the foreign
contribution which would be mentioned in the relevant letter. The Ministry of
Home Affairs is invariably endorsing a copy of the order of registration or
prior permission for each association/organisation to the concerned branch of
the bank through which the foreign contributions are to be received for credit
to the Associations/ Organisations deposit account.
5.7.4 For the above purpose, appropriate
systems may be devised within the bank to ensure meticulous compliance with
these instructions and completely eliminate instances of non-compliance. The
system so devised may be intimated to all the branches of the bank for proper
implementation and strict compliance and the same should be effectively monitored
at Head Office level.
5.7.5 Further, banks are also required
to submit a return furnishing details of the foreign contributions credited
to the accounts of associations/ organisations on a half yearly basis for the
period ending 30th September and 31st March every year as per the format given
in the Annex II to Government of India, Ministry of Home Affairs within
a period of two months from the close of half year. To facilitate timely submission
of half yearly returns to the Government, the banks may designate a 'Nodal Officer'
at the Head Office who should be responsible for ensuring accurate and timely
submission of returns.
5.7.6 Non-adherence to these instructions
will tantamount to violation of the provisions of the said Act. Even non-submission
of the prescribed return in time to the Government of India would be viewed
very seriously.
6. Settlement of claims in respect of deceased
depositors
To facilitate expeditious and hassle-free
settlement of claims on the death of a depositor, the following guidelines may
be followed:
ACCESS TO BALANCE IN DEPOSIT ACCOUNTS
6.1 Accounts with survivor/ nominee
clause
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 :
- 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;
- there is no order from the competent court restraining
the bank from making the payment from the account of the deceased; and
- 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.
6.2 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.
6.3 Accounts without the survivor/
nominee clause
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.
6.4 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.
6.5. 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.
6.6 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.
6.7 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.
6.8 Provisions of the Banking Regulation
Act, 1949
In this connection, attention is
also invited to the provisions of Sections 45 ZA to 45 ZF read with Section
56 of the Banking Regulation Act, 1949 and the Co-operative Banks (Nomination)
Rules, 1985.
6.9 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.
7 Deposit Mobilisation
7.1 Deposit Collection Agents
7.1.1 Banks are prohibited from
paying brokerage on deposits in any form to any individual, firm, company, association,
institution or any other person.
7.1.2 Banks should not employ/engage
outside persons even through firms/ companies for collection of deposits including
Non-Resident deposits or for selling any other deposit linked products on payment
of fees/ commission in any form or manner, except to the extent permitted vide
RBI Interest Rate Directives.
7.2 Acceptance of Deposits by
Unincorporated Bodies/ Private Ltd. Companies with 'Bank Guarantee'
Banks should not accept deposits
at the instance of private financiers or unincorporated bodies under any arrangement,
which provides for either the issue of deposit receipts favouring the clients
of private financiers or giving of an authority by power of attorney, nomination
otherwise for such clients receiving such deposits at maturity.
7.3 Deposit Collection Schemes
Floated by Private Organisations
It may be noted that the Prize
Chits and Money Circulation Schemes (Banning) Act, 1978 (No. 43 of 1978) imposes
a total ban on the promotion and conduct of prize chit scheme except by charitable
and educational institutions notified in that behalf by the State Governments
concerned. The lottery falls within the expression 'prize chit' under the Act
referred to above. Further, sale of lottery tickets on bank counters could be
open to abuse and avoidable complaints from members of public. Therefore, the
banks should not associate themselves directly or indirectly with lottery schemes
of organisations of any description.
8 Other Aspects
8.1 Greater Co-ordination between
Banking System and Income-Tax Authorities
8.1.1 Safe Deposit Lockers
In order to facilitate the identification
of locker keys by the Income-tax officials, the banks should emboss on all locker
keys an identification code which would indicate the bank and the branch which
had hired the lockers.
8.1.2 Co-ordination with Officers
of Central Board of Direct Taxes
There is a need for greater co-ordination
between the Income Tax Department and the banking system. As such, the banks
may ensure that they extend necessary help/co-ordination to tax officials whenever
required. Further, the banks will have to view with serious concern cases where
their staff connives/assists in any manner with offences punishable under the
Income Tax Act. In such cases, in addition to the normal criminal action, such
staff member should also be proceeded against departmentally.
8.2 Register for Unclaimed
Deposits
8.2.1 The banks are required
to submit to the Reserve Bank, a return in Form VIII showing unclaimed deposit
accounts in India which have not been operated upon for 10 years or more, as
at the end of each calendar year. In order to ensure accuracy and timely reporting,
it is desirable to maintain a separate register for this purpose at all the
branches of each bank.
8.2.2 The banks should, therefore,
advise their branches to maintain a register for unclaimed deposits in a separate
register.
8.2.3 The branches may also be
advised that entries therein may be made in respect of deposit accounts not
operated upon for 10 year. A separate folio may be opened in the register for
different types of deposit accounts.
8.2.3.1.1 The branches should ensure
to note in the folio in which the relative unclaimed deposit account is maintained,
that the unclaimed deposits register should be referred to before allowing operations
in the account, so as to caution the bank not to allow operations on such accounts
in the usual course but to do so after obtaining the authorisation of a higher
official.
9. 'Know Your Customer' (KYC)
guidelines and Anti Money Laundering Standards
As part of 'Know Your Customer'
(KYC) principle, Reserve Bank has issued several guidelines relating to identification
of depositors and advised the banks to put in place systems and procedures to
prevent financial frauds, identify money laundering and suspicious activities,
and for scrutiny/ monitoring of large value cash transactions. Instructions
have also been issued from time to time advising banks to be vigilant while
opening accounts for new customers to prevent misuse of the banking system for
perpetration of frauds. ‘Know Your Customer’ guidelines have been revisited
in the context of the Recommendations made by the Financial Action Task Force
(FATF) on Anti Money Laundering (AML) standards and on Combating Financing of
Terrorism (CFT). These standards have become the international benchmark for
framing Anti Money Laundering and Combating Financing of Terrorism policies
by the regulatory authorities. Banks are advised to ensure that a proper policy
framework on ‘Know Your Customer’ and Anti-Money Laundering measures is formulated
and put in place with the approval of the Board. While preparing operational
guidelines, banks may ensure that information sought from the customer is relevant
to the perceived risk, is not intrusive, and is conformity with the guidelines
issued in this regard from time to time. Any other information from the customer
should be sought separately with his/her consent and after opening the account.