Today RBI vide Notification No RBI/2012-13/168 DBOD No. Leg. BC. 37/09.07.005/2012-13 has issued a clarification on ‘Premature Repayment of Term/Fixed Deposits in banks with “Either or Survivor” or “Former or Survivor” mandate’
The Gist of today’s notification are: –
In case of term deposits with “Either or Survivor” or “Former or Survivor” mandate, banks are permitted to allow premature withdrawal of the deposit by the surviving joint depositor on the death of the other, only if, there is a joint mandate from the joint depositors to this effect.
The joint deposit holders may be permitted to give the mandate either at the time of placing fixed deposit or anytime subsequently during the term/tenure of the deposit.
If such a mandate is obtained, banks 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.
No penal charges to be levied, for such premature withdrawals.
Banks have been advised to 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.
Today’s notification was essential as there were many complaints to RBI that Banks are not incorporating a clause in the account opening form stating that premature withdrawal of the deposit is allowed by the surviving joint depositor on the death of the other, only if, there is a joint mandate from the joint depositors to this effect, nor they were adequate publicity measures to make customers aware of the need of such a mandate.
This was putting the “surviving“ deposit account holders(s) to unnecessary inconvenience. The survivors would only come to know of this clause, when the other account holder has expired, and the survivor account holder has approached the Bank Branch for premature term deposit closure.
The clarification provided in this circular would supersede para 3 of circular DBOD.No.Leg.95/09.07.005/2004-05 dated June 9, 2005.
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