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.
Based on the Reserve Bank of India (RBI) advisory, the Indian Banks’ Association (IBA) circulated a Model Operational Procedure (MOP) for the settlement of claims of deceased depositors. Additionally, the IBA finalized guidelines for settling claims related to deceased locker hirers and depositors of safe custody articles. All banks have been advised to adopt a Board-approved policy for claim settlements involving deceased and missing persons.
The RBI has periodically issued detailed guidelines to simplify procedures for settling claims of deceased depositors and addressing matters concerning safe deposit lockers and safe custody articles. The RBI, through Circular RBI/2021-2022/86 DOR.LEG.REC/40/09.07.005/2021-22 dated August 18, 2021, issued revised instructions on Safe Deposit Locker and Safe Custody Article Facilities provided by banks.
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.
I. Procedure for Settlement of Claims Based on Nomination
For deposit accounts, lockers, or safe custody articles where the deceased account holder made a valid nomination under the Banking Companies (Nominations) Rules, 1985, and the nomination is duly registered in the bank’s records, branches shall release the balance amount or locker contents to the nominee.
It is clarified that payment or delivery to the nominee is in the capacity of a trustee for the legal heirs or legatees of the deceased. This action does not affect any other legal claims on the assets. Once the claim is settled with the nominee, the bank is discharged from all liabilities related to the account or locker.
Documents Required from the Nominee:
- Death Certificate issued by a competent authority
- KYC documents of the nominee (e.g., Voter ID, Aadhaar Card, Passport, Driving License, or other bank-accepted identification)
For Minor Nominees in Safe Deposit Lockers:
- An inventory of locker contents will be prepared in the presence of two independent witnesses, a bank officer (not associated with the locker facility), and the claimant.
- A declaration must be obtained from the nominee or a representative for the minor, confirming receipt of all contents and no objection to the locker being reallocated.
Branch-Level Settlement: Claims under nominations shall be processed at the branch level, irrespective of the claim amount, without linking it to the delegated powers for death claim settlements. However, all procedural requirements must be strictly followed.
II. Procedure for Settlement of Claims Based on Legal Representation
Settlement through legal representation includes claims settled upon submission of a Succession Certificate, a Probated Will, or a Letter of Administration.
Key Differences:
- Letter of Probate: Used when the deceased left a will. It is a certified copy of the will under the court’s seal, granting the executor authority over the estate. Probate is conclusive proof of the executor’s legal authority and the will’s authenticity.
- Mandatory Probate: Required for wills by Hindus, Buddhists, Sikhs, or Jains made in Presidency towns (Chennai, Kolkata, Mumbai) and other areas notified by state governments.
- Succession Certificate: Issued by a civil court when no will exists. It authorizes the holder to collect debts and securities due to the deceased and facilitates the transfer of assets.
- Letter of Administration: Granted when there is no will or the executor named in the will is unable or unwilling to act. Beneficiaries can apply to the court for this document to manage the deceased’s estate.
By following these streamlined procedures, banks ensure efficient and legally compliant settlement of claims related to deceased depositors and locker hirers.
- Identification: The identification of nominee whether resident or non-resident, the procedure is the same. The nominee can be identified by:
Settlement: The deposit account proceeds may be settled to the claimants through a negotiable instrument (DD/Banker’s cheque) or transfer the claim proceeds 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 sureties 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.
Originally posted on 27.05.2025, edited and reposted on 10.01.2025
Related articles:
Claim settlement by banks where survivor/nominee clause exist
How banks settle claims of a missing person on presumed death
