Death claims: How some banks still pose hurdles


A nominee of a bank account—savings or fixed deposit— is liable to receive proceeds from the said account on the demise of the account holder. This is as per the regulations of the Reserve Bank of India (RBI). Yet, not all banks implement this rule in true spirit and so nominees or legal heirs of account holders face numerous challenges during death claim processing. This is true of some large banks, where each of the branches are dependent on the rules followed by the zonal and regional offices in blatant violation of RBI guidelines.

At such branches, the officials concerned demand irrelevant documents, claiming that it is in accordance with instructions sent by the lender’s legal department. Branch officials choose not to respond to emails or letters which quote RBI guidelines or even their own policies (as hosted on their website). With internal grievance cells lacking independence and effectiveness; a lukewarm support under Integrated Ombudsman Scheme 2021 seems to be more of a compliance requirement resulting in unnecessary harassment of account holders and their nominees.

Such was the case with Pawar, who did not want to disclose her first name—was the nominee of her son’s savings bank account with a private sector bank (at Sri Ganganagar). After her son’s death, the bank refused to accept her claim application, citing that the nominee should obtain no objection certificates from two companies— her son was an authorized signatory at one the companies and a partner at the other. Both these entities also had current accounts with the same branch of the bank and were debt free. When her claim was rejected, Pawar, a retired banker, threw the rule book at them on the relevance of nomination and immunity from the two accounts owned by independent entities. The branch manager, however, refused to get into a dialogue, while the zonal and regional heads refused to meet the nominee or accept representation letters. Her claim is pending for more than six months now.

In another case, Lima—who too did not want to disclose her full name—was the nominee of her mother’s savings bank account and some fixed deposits with a leading public sector bank. Her mother suffered a cardiac arrest and died when she came to visit her in the US in 2021. Her certificate of death was issued by the department of health and mental hygiene city of New York. Lima visited India in February this year and submitted a death claim. The savings account had periodic ECS transactions and was operative. The bank refused to accept the claim and demanded that the death certificate be adjudicated in the US and then notarized. This stipulation, as per the bank’s own website, is applicable only to non-residential external (NRE) or non- resident ordinary (NRO) account holders who die overseas.

Accordingly, Lima then submitted the death certificate, which, too, was refused by the bank in violation of the model operational procedure (MOP) adopted by its board of directors, and against the model customer rights policy formulated by Indian Banking Association (IBA). The bank’s customer service remained a mute spectator and its legal department opted not to reply to any letters or submissions. A plea to the chairman and independent board members stating that a resident account owned by a resident Indian cannot be subject to rules applicable to non-resident accounts did not heed any response. The bank also did not acknowledge a copy of return of income filed by Lima’s legal representative on the earnings and a copy of income tax returns of the deceased in India. Sadly, the bank followed its own interpretation of deciding the residential status of a deceased account holder and not as per Fema or income tax Act.

Lima also faced a similar problem with another public sector bank. Here though, her mother had two separate accounts in two different branches of this bank. While one branch accepted the death certificate (duly notarized in India) and processed the claim, another branch (located barely 2km away) initially refused to accept the certificate. When questioned about the differential treatment at two different branches of the same bank, the lender quietly settled the claim.

Many banks, in utter disregard of RBI notifications, continue to harass nominees and legal heirs and try to deprive them of what is rightfully theirs. The regulatory regime lacks adequate mechanism to prevent such occurrences, perhaps due to lack of accountability and levy of penalties.

Rajat Dutta is founder & initiator, Inheritance Needs Services Pvt. Ltd

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Updated: 07 Aug 2023, 10:49 PM IST

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