Let me today tell you something very important about the money left by a deceased account holder in the bank account. At the same time, it’s equally important to know the onus of bank loans outstanding against the deceased account holder.
Basically, the issue cropped up during an interaction with the chairman & managing director (CMD) of the J&K Bank, Rajesh Kumar Chhibber. He candidly admitted that at the operation levels, family of a deceased account holder have to go through rigorous process, which otherwise is avoidable.
“Jab bank ko deposits lenayhotayhein, toa customer ko chai aur coffee pilayeejateehy. Leikin jab wohi customer kisiwajah say guzarjatahytoaosski family kowohpaisayhasilkarnay k liyai formalities kiaadmeintakleefpohnchayeejatihy” (When a customer enters a bank branch to deposit money, he is welcomed with a cup of tea or coffee. But when the same customer expires, his family is subjected to lot of inconvenience in the name of formalities to claim the money of the deceased family member.)
This is what the CMD R K Chhibber said. However, he was quick enough to state that he has been continuously asking the operational levels to give all comfort to the family members of a deceased account holder and not to entangle them in rigorous process for claiming the money of the deceased account holder.
Generally speaking, the treatment accorded by banks to the deceased depositor’s family has not been healthy. Even as there are standing instructions from the Reserve Bank of India (RBI) to the banks to facilitate expeditious and hassle-free settlement of claims on the death of a depositor, they are asked to complete host of formalities, which are mostly cumbersome in nature. Tales of ‘tortuous procedures’ adopted at the operational levels causing considerable distress to such family members continues to pour in.
The violation of standing regulatory instructions may be lack of knowledge about the procedures in such cases at the bank official level handling such cases. And even lack of awareness on part of the bank customers about their rights in such cases can also be a possibility of getting trapped into ‘unnecessary’ procedures.
As all of us know that demise in someone’s family is always rattling. For weeks together, the family is gripped in grief and disorder for losing the loved one. However, ultimately life in the bereaved family returns back to normal later. Once settling back to normal, the family among other things gets into the act of assembling financial data like life insurance policies, locker keys, investment details, loan details etc. But the most important thing is the deceased’s bank account. Notably, it is the bank account which is the key to someone’s financial life. For the family it’s critical to get access to the bank account of the deceased.
In this backdrop, it makes a sense to know all about the systems and procedures of ensuring hassle-free and expeditious settlement of claims on the death of a depositor.
What are the immediate steps to be taken by the family members of a deceased bank account holder?
In the first instance, they should approach the bank and share about the account holder’s death. Ask the bank official about the procedure to claim the money from the deceased’s account/s. The bank will immediately put the deceased account in a dormant state and there would be no withdrawals possible. However, the deposits are still possible, because it may happen that few payments / dividends etc. are going to be credited in coming days.
How to access to the balance in the deceased’s deposit accounts?
There are two possible instances. Either the account may be having a sole ownership or a joint ownership.
In case of a sole ownership account, the bank will first check whether the account has a nominee or not. If there is nomination, the bank can transfer the proceeds to the nominee considering him or her to be the trustee of the legal heirs. The nominee has to produce his or her identity proof and death certificate of the deceased person.
In case there is no nominee, then all legal heirs of the deceased depositor have to jointly claim the deposit. They have to submit certain documents such as proof of address and identity, succession certificate or letter of administration or probate granted by a competent court. These documents are in addition to the death certificate of the deceased account holder. They will also have to give indemnity to the bank to make good the loss if their claim is found to be invalid or inadequate or there is any adverse ruling by the court later on.
Here it is worth mentioning that banks have been advised to adopt a simplified procedure for repayment to legal heir(s) of the depositor keeping in view the imperative need to avoid inconvenience and undue hardship to the common person. In this context, banks may, keeping in view their risk management systems, fix a minimum threshold limit, for the balance in the account of the deceased depositors, up to which claims in respect of the deceased depositors could be settled without insisting on production of any documentation other than a letter of indemnity.
In case of joint accounts, the situation is different. A particular type of joint account, known as either or survivor, anyone or survivor clauses, allow unhindered access to all accountholders separately. However, if in an account the mode of operation is joint, then two or more account holders have to authorise together to access the funds. In restricted joint accounts such as ‘former or survivor’, or ‘later or survivor’ main account holder is allowed to operate the account till he/she is alive and others get the access to account only in case of death of the primary account holder.
Where the account was opened with the survivorship clause (‘either or survivor’, or ‘anyone or survivor’, or ‘former or survivor’ or ‘latter or survivor’), the payment of the balance in the deposit account to the survivor represents a valid discharge of the bank’s liability.
It is worth mentioning that while making payment to the survivor(s) / nominee of the deceased depositor, the banks have been strictly advised to desist from insisting on production of succession certificate, letter of administration or probate, etc., or obtain any bond of indemnity or surety from the survivor(s)/nominee, irrespective of the amount standing to the credit of the deceased account holder.
However, the bank has to exercise due care and caution in establishing the identity of the survivor(s) / nominee and the fact of death of the account holder, through appropriate documentary evidence. The bank will also ensure that there is no order from the competent court restraining the bank from making the payment from the account of the deceased.
It is also noteworthy that the survivor(s) / nominee would be receiving the payment from the bank as a trustee of the legal heirs of the deceased depositor, i.e., such payment to him shall not affect the right or claim which any person may have against the survivor(s) / nominee to whom the payment is made.
Who is responsible to repay the loans of a deceased person?
It’s most important for the family members to check deceased’s loan liabilities, whether it’s secured or unsecured loans. The outstanding loans, be it business, home, vehicle or personal loans or credit card dues, have to be repaid by the legal heirs of the deceased. If the borrower had a co-signer, or joint debtor, the latter will be held responsible for repaying the loan. If he fails to do so, the lender can file a lawsuit in order to get the payment. In case of a single borrower, it is typically the legal heir who is liable to repay all debt.
Are the women legal heirs also responsible to repay the debts?
Legal heirs include the wife and daughter/s as well. Therefore, the banks can approach children and the widow to recover the loan outstanding against the deceased borrower. All these heirs in dire cases may have to part with their inheritance in the deceased’s property although a mother’s property cannot be attached or liquidated by banks.
(Inputs from RBI website)