The RBI has asked regional rural and co-operative banks to modify fixed deposit (FD) account opening forms to allow pre-mature withdrawal of FD on death of one of the joint account holders without any penalty.
Under the modified norms, it would be easier for the surviving joint account holders of FD with 'either or survivor' or 'former or survivor' mandate to go in for premature withdrawal of FD in the event of death of the other.
As per the notification of the Reserve Bank of India (RBI), banks will have to incorporate a clause in the FD form to give option of premature withdrawal by survivor in case of death of the other joint account holder.
"Many of the RRBs/StCBs/DCCBs have neither incorporated such a clause in the account opening form, nor have they taken adequate measures to make the customers aware of the facility of such mandate, thereby putting the 'surviving' deposit account holders to unnecessary inconvenience," RBI said in a notification.
Regional Rural Banks (RRBs)/ State and Central Co-operative Banks (StCBs/DCCBs) are, therefore, advised to invariably incorporate the aforesaid clause in the account opening form and also inform their existing as well as future term deposit holders about the availability of such an option, it said.
The RBI has issued the notification following complaints that several banks have not fully complied with its earlier circular of allowing premature withdrawal of an FD by surviving joint account holder.
"The joint deposit holders may be permitted to give the joint mandate allowing premature withdrawals of fixed/term deposits also in accordance with the mandate of 'either or survivor' or 'former or survivor' either at the time of placing fixed deposit or anytime subsequently during the term/tenure of the deposit," RBI said.
"If such a mandate is obtained, RRBs/StCBs/DCCBs can allow premature withdrawal of term/fixed deposits by the surviving depositor without seeking the concurrence of the legal heirs of the deceased joint deposit holder," it added.
It further clarified that "such premature withdrawal would not attract any penal charge".