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

BY R.K.GUPTA
B.Com (Hons); CAIIB; AIB (LONDON); LL.B(I)

PURPOSE OF ARTICLE
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 Bank in India. For any clarification please feel free to contact the undersigned personally at: House No-207 Sector no 16 FARIDABAD or Mobile No +919899093635

VARIOUS OPTIONS OF OUR SAVINGS

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 survivor 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 10.5% 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

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such a mandate when given by the depositors generally is found to be as under: EITHER OR SURVIVOR: The deposit can be withdrawn by any of the person on maturity and in case one of them expires, the entire money be paid only to the survivor named in term deposit as absolute beneficiary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 just after the death or on 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 FORMER OR SURVIVOR: The Deposit can be withdrawn by the person whose name is written first till he is alive and in case of his death, the amount may be paid only to survivor named in term deposit as absolute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 just after the death or on 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 BUT HE IS A TRUSTEE AND WILL HOLD THE MONEY ON BEHALF OF THE LEGAL HEIRS OF THE DECEASED AND NOT FOR SELF. c. HE CAN NEVER BECOME THE ABSOLUTE OWNER OF THE DEPOSITS. d. 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.

CLARIFICATION OF MANDATE OF F/S BY RBI

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.

CLARIFICATION OF MANDATE THROUGH EXAMPLE

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 01.01.20010. b. This Couple of A&B has two sons and one daughter. c. In case of death of A on 04.03.2012 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 maturity or before maturity whenever she prefers according to his convenience. e. Same applied for the mandate of former or survivor

REVISED GUIDELINES OF RBI

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.

UNDERSTANDABLE THROUGH TABLE:

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

When

Both Depositors alive Both Depositors are alive One Depositor is alive One Depositor is alive

Payment on Maturity/ Signatures required of Payment before maturity are Payment on Maturity Either Depositor Pre-payment before maturity Payment on Maturity Pre-payment before maturity
Pre-payment maturity

Both Depositor

One Depositor is alive

Survivor Depositor Surviving Depositor + legal heirs of the deceased Depositor before Surviving depositor

UNDERSTANDABLE THROUGH TABLE:

If specific mandate is given by the beneficiaries to the Bank with EITHER OR SURVIVOR ON OR BEFORE MATURITY then the following rules will apply as per revised guidelines: Both Depositors are alive Both Depositors are alive One Depositor is alive One Depositor is alive Payment Maturity Payment maturity Payment Maturity Payment maturity on Either of the depositor before Either of the depositor on Surviving depositor before Surviving depositor

UNDERSTANDABLE THROUGH TABLE:

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

Both Depositors are alive Both Depositors are alive One Depositor is alive One Depositor is alive

Payment on First named Maturity depositor Payment before First named maturity depositor Payment on Surviving Maturity depositor Payment before Surviving maturity depositor

ADVICE TO THE READERS

The necessary instructions have already been issued by most of the Banks to their field functionaries but there is no awareness camp or display for the customers in any of the bank. More so, the Field functionaries of the Bank are also not aware of the recent guidelines issued. Therefore, if your intention are in accordance with the example given hereinabove, give a specific mandate to bank for payment 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 even before maturity has been noted. This will help you to fulfil your last wishes without problems to the survivor.

THANK YOU & WISHING YOU A PEACEFUL LIFE

30-04-2012 14