There are two possibilities in a bank account maintained by a customer viz. (i) a deposit account is opened in a bank with a valid nomination or with the survivorship clause like ‘either or survivor’, or ‘anyone or survivor’, or ‘former or survivor’ or ‘latter or survivor’ etc. (ii) A deposit account is opened in a bank without a valid nomination or without the survivorship clause like ‘either or survivor’, or ‘anyone or survivor’, or ‘former or survivor’ or ‘latter or survivor’ etc.
Banks in India are guided by RBI to set a framework for the settlement of claim amount where accounts are maintained by the bank without the survivor/nominee clauses. This is to avoid superfluous, undue hardship and inconvenience to the claimants. Accordingly, every bank in India has fixed a minimum threshold limit for the balance in the account of deceased depositors up to which claims of legal heirs can be settled without demanding any documents other than a letter of indemnity. As per RBI guidelines premature closure of the term deposit(s) is allowed in the event of the death of the depositor. Such premature closure of deposit would not attract any penal charges.
The deposit account proceeds may be settled to the claimants through a negotiable instrument (DD/Banker’s cheque) or transfer the claim proceds in the name of appropriate beneficiary on scrutiny of the following.
- The death of the account holder is confirmed to the bank through appropriate documentary evidence (death certificate).
- Bank has verified properly the identity of the claimant(s) and made payments only after the suitable identification of the claim(s), to the bank’s satisfaction and the establishment of the identity of the legal heirs/legal representatives.
- The bank has not received an order from the competent court restraining the bank from such payments.
- Production of indemnity from the claimants for the claim settled by the bank
- In case the claim amount exceeds the threshold limit fixed by the bank’s Board, the bank may insist production of any other documents like succession certificate, letter of administration or probate, etc., or obtain any bond of indemnity from the claimant as per system and procedure adopted by the bank.In certain exceptional cases banks may also obtain indemnity plus one surety good for the amount or two surities jointly good for the amount.
- When other legal heirs do not have objection in settling the claim amount to any one of them, banks take a letter of relinquishment (letter of authority/letter of disclaimer etc.) from the remaining legal heirs/representatives. In such cases there is no need to obtain affidavit cum indemnity from other legal heirs.