How banks settle claims of a missing person on presumed death?

Settlement of Claims in Respect of Missing Persons Presumed Dead: A Formal Overview

Banks in India typically settle claims related to missing persons who are presumed dead by adhering to established legal provisions and regulatory guidelines, primarily those issued by the Reserve Bank of India (RBI). When a person has been missing for a legally stipulated duration—typically seven years—a presumption of death may be invoked, enabling the release of funds in the deceased’s account to their legal heirs or nominees.

Legal Framework: Indian Evidence Act, 1872

The settlement of such claims is governed by Sections 107 and 108 of the Indian Evidence Act, 1872:

• Section 107 outlines the burden of proof regarding whether a person is alive or deceased. The onus to prove that an individual is dead rests with the person asserting the death.
• Section 108 establishes the presumption of death. It provides that a person who has not been heard of for seven years by those who would naturally have heard from them, if alive, may be presumed dead. In such cases, the burden shifts to the person claiming the individual is alive.

To initiate the claim process, legal heirs or nominees must obtain an express declaration of presumption of death from a competent court under Sections 107/108. Only upon such a judicial presumption can the bank proceed with the settlement of the claim.

Bank Policies and Procedural Guidelines

Most banks have formulated internal policies that enable them to settle claims related to missing persons, based on legal counsel and the specific facts of each case. Depending on their risk assessment, individual banks may prescribe threshold limits. Within these limits, claims may be settled without requiring extensive legal documentation, provided the following are submitted:

• First Information Report (FIR) and a non-traceable certificate issued by police authorities.
• Letter of indemnity from the claimants.

Detailed Process for Claim Settlement

1. Legal Presumption of Death
   A person may be legally presumed dead after seven years of being reported missing, pursuant to Section 108 of the Indian Evidence Act.
2. Judicial Documentation
   Legal heirs or nominees are required to produce appropriate legal documentation—such as a succession certificate, probate, or letter of administration—from a competent court.
3. Documentation Requirements
   Banks generally mandate the submission of the following:
   • Proof of death (e.g., court declaration or death certificate).
   • Proof of identity and legal standing of the heirs or nominees.
   • KYC (Know Your Customer) documents of all claimants.
   • Letter of indemnity or a formal declaration from the heirs asserting their claim.
4. Threshold Limits and Simplification
   To expedite the process, the RBI advises banks to establish threshold limits under which claims may be settled with minimal documentation, including police reports and indemnity letters.
5. Nomination Facility
   If the missing person had nominated an individual for the account, the bank typically releases funds to the nominee upon verification of identity and confirmation of the presumed death.
6. Joint Accounts
   In the case of joint accounts, surviving account holders may access the funds, subject to the operational mandate and requisite documentation.
7. Local Enquiries
   Banks may conduct independent local inquiries to substantiate the facts surrounding the disappearance and confirm the identity of the rightful claimants.
8. Timely Settlement
   Banks are expected to process and settle claims within a reasonable timeframe, usually within 15 days from the date of receipt of all requisite documents.
9. Release of Additional Assets
   In addition to account balances, banks may also be required to release other assets held in the deceased’s name, such as property documents or items kept in safe custody.

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