In June 2005, the banking regulator issued detailed instructions to banks on how to simplify and expedite claim settlement, following the death of a depositor. The Reserve Bank of India in its circular said: "Banks are advised to adopt a simplified procedure for repayment to legal heir(s) of the depositors, keeping in view the imperative need to avoid inconvenience and undue hardship to the common person."
Six years hence, 'expeditious and hassle-free procedures' continue to elude claimants. The RBI circular says in the event of the death of the depositor, banks should allow premature termination of deposit accounts without any penal charges and this should be stated in the account opening form itself.
It also states that where the account holder had made use of the nomination facility 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'), insistence on production of legal representation is superfluous and unwarranted and only serves to cause avoidable inconvenience to the survivors and would invite supervisory disapproval.
It also reiterates that banks should desist, in such cases, from insisting on production of succession certificate, letter of administration or probate, etc, or obtain any bond of indemnity or surety from the survivor or nominee. Even where the deceased depositor has not made any nomination, banks should adopt a simple procedure that eliminates harassment to the claimant.
The circular advises banks to provide guidance to depositors on the benefits of nomination facility and also the survivorship clause. Depositors should also be made aware of the fact 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, the regulator says.
Here's a case showing how banks are violating these guidelines.
Anju: My father and I had two Fixed Deposits (FDs) and a savings account with a public sector bank, with instructions "as payable to former or survivor". In November 1991, my 72-year old father went missing and could not be traced despite our best efforts. When informed of it, the bank said I had to wait for seven years for liquidation of the accounts and renewed the deposits in 1994 for a further period of five years. In 1999, when I deposited the certificates and asked for transfer of the money into my account, I was told to bring the 'death certificate' and the succession certificate and till now the money has not been transferred to my account. Kindly advise.
Answer: If you see the five-page circular of the RBI (dated June 9, 2005), titled "Settlement of claims in respect of deceased depositors-simplification of procedure" from which I have quoted above, you will see that the bank has violated the regulator's instructions with impunity.
Please write to the nodal officer of the bank quoting the RBI circular and demanding immediate transfer of the money to your account, along with penal interest and compensation. If there is no positive response, please file a complaint before the consumer court. Even if, on the receipt of your letter, the money is transferred to your account, I would still suggest that you lodge a complaint with the consumer court asking for punitive damages. The letters (and the response-whether positive or negative) will ensure that the case does not become time-barred in so far as consumer courts are concerned. This is a fit case for award of exemplary damages by the consumer court as the bank's action (or inaction) deserves to be condemned in the strongest of terms.