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PAYMENT TO EITHER OR SURVIVOR IN DEPOSITS OF BANK-REVISED GUIDELINES OF RESERVE BANK OF INDIA

My purpose to write this article is to make, the people at large, aware of the changes made by Reserve Bank of India which have material impact on their decision while placing the money in Term/ Fixed Deposits in the Banks in India.

We all have various options to keep our savings so as to ensure the following aspects:

a. Better yield /return/ rate of interest on savings.

b. Easy liquidity.

c. Complete safety of interest and principal

d. After the death of the beneficiary, the payment should be made available to the person to whom the depositor wants without any problem.

e. The most of the people, though other various options are available, prefer to keep their savings in Term Deposits/Fixed Deposits in Banks specifically in the present scenario when the Rates of Interest are better which are ranging from 8% to 9.5% depending on period of deposits.

f. Most of us keep their deposits in joint name i.e. Self and the spouse; self and son; self and daughter etc with the mandate of Either or Survivor / Former or Survivor/later or survivor /any one of us/jointly.

THE INTENTION OF A MANDATE BY THE DEPOSITOR

The intention of such a mandate when given by the depositors generally is found to be as under:

EITHER OR SURVIVOR: The deposit can be withdrawn by any of the person on maturity and in case one of them expires, the entire money be paid  only to the survivor named in term deposit as absolute beneficiary irrespective of any other legal heirs after the death on or before maturity i.e. on presentation to the Bank without any problem.

FORMER OR SURVIVOR: The Deposit can be withdrawn by the person whose name is written first till he is alive and in case of his death, the amount may be paid only to survivor named in term deposit as absolute beneficiary irrespective of any other legal heirs after the death on or before maturity i.e. on presentation to the Bank without any problem.

In both the above mandates, the intention of the deceased depositors is to give this money to the survivor mentioned in the term deposits irrespective of his any number of legal heirs.

EFFECT OF NOMINATION MADE WHILE PLACING THE DEPOISTS

a. Please note that nominee has no relation with this mandate.

b. Nominee will receive the money only as a trustee of the legal heirs of the deceased  but not for self.

c. He can never become the absolute owner of these deposits.

The legal heirs of the deceased can claim this amount from the nominee at any point of time

CLARIFICATION OF MANDATE OF E/S BY RBI

So far the depositors were of the opinion that the banks will be following their instructions in letter and spirit. But Reserve Bank of India has issued new guidelines vide their circular no DBOD No. Leg BC 46/ 09.07.005/2011-12 dated 04.11.2011 to all the Banks which states that:

In this connection, it is clarified that if fixed/term deposit accounts are opened with operating instructions ‘Either or Survivor’, the signatures of both the depositors need not be obtained for payment of the amount of the deposits only on maturity. However, the signatures of both the depositors have to be obtained, in case the deposit is to be paid before maturity. If the operating instruction is ‘Either or Survivor’ and one of the depositors expires before the maturity, no pre-payment of the fixed/term deposit may be allowed without the concurrence of the legal heirs of the deceased joint holder. This, however, would not stand in the way of making payment to the survivor on maturity.

In case the mandate is ‘Former or Survivor’, the ‘Former’ alone can operate/withdraw the matured amount of the fixed/term deposit, when both the depositors are alive. However, the signature of both the depositors have to be obtained, in case the deposit is to be paid before maturity. If the former expires before the maturity of the fixed/term deposit, the ‘Survivor’ can withdraw the deposit only on maturity. Premature withdrawal would however require the consent of both the parties, when both of them are alive, and that of the surviving depositor and the legal heirs of the deceased in case of death of one of the depositors.

a. For example “A” has placed his money in name of “A” (self) & “B” (Spouse) with the mandate of either or survivor in Term Deposits/Fixed Deposits for 3 years in the Bank on 01.01.2013.

b. This Couple of “A&B” has two sons and one daughter.

c. In case of death of “A” on 04.03.2013 during the running period of Term/Fixed Deposit, the money shall not be paid to “B” (Spouse) without consent from their two sons and one daughter being legal heirs.

d. Whereas the intention of “A” was that the entire money, after his death, should be paid to his/her spouse (B) on or before maturity whenever she prefers according to his or her convenience.

e. Same applied for the mandate of former or survivor

f. “If the joint depositors prefer to allow premature withdrawals of fixed/term deposits also in accordance with the mandate of ‘Either or Survivor’ or ‘Former or Survivor’, as the case may be, it would be open to banks to do so, provided they have taken a specific joint mandate from the depositors for the said purpose.”

REPAYMENT OF TERM DEPOSITS BY BANKS WITH EITHER OR SURVIVOR MANDATE ONLY

SITUATION IF

SIGNATURE REQUIRED IF PAYMENT ON MATURITY

SIGNATURE REQUIRED IF PAYMENT BEFORE MATURITY

Both Depositors are alive

Either of the Depositors

Both the Depositors

One Depositor is alive and other is dead

Survivor Depositor

Surviving Depositor + legal heirs of the deceased Depositor

If specific mandate is given by the beneficiaries to the Bank with EITHER OR SURVIVOR ON OR BEFORE MATURITY IN CASE OF DEATH then the following rules will apply as per revised guidelines:

SITUATION IF

SIGNATURE REQUIRED IF PAYMENT ON MATURITY

SIGNATURE REQUIRED IF PAYMENT BEFORE MATURITY

Both Depositors are alive

Either of the depositor

Both the depositor

One Depositor is alive and other is dead

Surviving depositor

Only Surviving depositor    (no concurrence of the legal heirs of the deceased required)

ADVICE TO THE BANKERS BY RBI

Banks have been advised vide their circular no DBOD No. Leg BC 46/ 09.07.005/2011-12 dated 04.11.2011 & again with clarification vide circular no DBOD No. Leg. BC. 37 /09.07.005/2012-13 August 16, 2012 that:

a. Banks should send the intimation to all of its existing customers also for this change in mandate.

b. Banks should get this clause inserted in the new  account opening forms of term deposits.

c. Banks should give publicity to the public at large.

d. The banks should get the new mandates stamped on the existing account opening forms also.

e. It is also reiterated that such premature withdrawal would not attract any penal charge.  

f. Most of the banks have issued the guidelines to the field functionaries but none of branch of most of the banks have implemented it letter and spirit and the ground staff is not even aware of it.

g. Most of the banks have not amended their system (CBS) with the new mandates resulting of which the customers have to face this problem.

ADVICE TO THE READERS

If your intention are in accordance with the example given hereinabove,  give a specific mandate to bank for payment on or before maturity and ask your banker to write down on the Term/Fixed Deposits Receipt that their mandate of Either or Survivor /Former or Survivor for payment  on or before maturity in case of death has been noted. This will help you to fulfil your last wishes without problems to the survivor.

Are you aware of this change if so have you taken any step with your bank?

If not why to do delay.

Contact  today & get your tomorrow secured with peace of mind.

Make aware of your clients  and make it a point of concurrent audit of the branch who are professionals.

Professional must ensure that these new mandates have been incorprated in the sysgtem itself (CBS) of the respective bank.

For any clarification please feel free to contact the undersigned at:

House No-207 Sector no 16 FARIDABAD or through mail: rkgupta1949@hotmail.com


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Category Audit, Other Articles by - RAM KUMAR GUPTA 



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