Bank deposits payable to "either or survivor"
SURENDRA KUMAR TEWARI
(Querist) 06 March 2012
This query is : Resolved
Hello sirs,
I am a new member of the club, SURENDRA KUMAR TEWARI. The querry I am putting forth is not mine but of several depositors
The Banks accept deposits from public in joint names payable to "Either or Survivor" when the subjected deposit is due for payment. In case of a running account, like saving or current account, there appears no problem. In case of Fixed Deposits, the Banks generally take a plea that the claus "either or survivor" applies only when the deposit matures. In case of premature payment the Banks insist for dischrge by all the joint depositors. This beats the very purpose of the mandate "either or survivor" and leads to avoidable harassment to the depositors.
My logic in this regard is as under:
(i) The property covered under the subjected deposit belongs to all the depositors and their intention remains that whenever paid, the deposit amount can be collected/ received by any of the depositors without putting others to inconvenience and therefore a mandate "either or survivor" is given to the bank. The banks apply this clause only when the term of the deposit gets over. The question arises why the deposit is paid, by the bank, before maturity if the term of contract is so vital. The fact remains that there exists no mandate of "payable to either or survivor" only after maturity. It in no way restricts the bank to pay the proceeds to either depositor when it is paid before maturity.
(ii) Now a days, most of the Banks have a hiden provision of auto-renewal of such deposits for their own convenience and whenever a depositor approaches the bank for encashment of the deposit after delay of a few days, the banks treat it as premature payment thereof and insist for discharge of deposit receipy by all the depositors. But if the depositor approches the bank a day before its maturity, the bank do not entertain it for payment on maturity date. Sometimes, there remains intruption in banking services for technical faults in computers or strike or holiday on the date of maturity but the central server of the bank renews the deposit on the date of maturity itself, automatically. Then when the depositor approches the bank very next day for its payment, the bank treats it as premature payment because the deposit wouldhave been renewed for the next term, automatically. This all beats the very purpose of using the mandate "either or survivor".
(iii) I have an impression about a decision of a competent court, perhapes some High Court or Supreme Court, to the effect that the mandate "either or survivor" should also apply in case of premature payment of such deposits. Incidentally, I donot have the exact details or case number of the said decision.
I request the experts, in this regard, to provide relevant guidance and provision in the law in order to save so many sufferers, particularly the senior citizens from the inconvenience.
Thanks.
Guest
(Expert) 06 March 2012
It would be better if you mention about the problem posed to you personally, not about several others, in order to get proper advice of the experts.
However, any premature encashment of FD by any one of the depositors normally raises doubt about some fraud being committed by one of the co-depositors without the knowledge of the other co-depositor. So, the step by bank may be towards curbing of any fraudulent premature encashment of the FDs. Needless to mention that banks are liable to protect the money of their depositors against any fraud.
Deepak Nair
(Expert) 06 March 2012
Nicely advised by Dhingra Sir.
ajay sethi
(Expert) 06 March 2012
agree with dhingraji .
V R SHROFF
(Expert) 06 March 2012
agree with dhingraji .
Surendraji, try be short query, with your problem.
ajay sethi
(Expert) 06 March 2012
please go through the circularLAC/19-96-29 28 August 1980
issued by RBI for accounts with either or survivor tag. as per said circular banks have absolute discretion and subject to such terms as bnaks deem fir make premature payment to either or survior
Annex I
Master Circular
Maintenance of Deposit Accounts
Joint Accounts – ‘Either or Survivor’, ‘Latter or Survivor’
‘Former or Survivor’, etc.
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{Ref.Para 5.1.1 (i)}
LAC/19-96-29 28 August 1980
Chief Executives of all member banks
Dear Sirs,
Joint Accounts ‘Either or Survivor’,
Latter or Survivor’ ‘Former or Survivor’ etc.
In the recent past, several letters have appeared in the press highlighting the difficulties experienced by the joint holders of Savings Bank or Term Deposit accounts, especially in regard to payment before maturity or in the settlement of claims when one of the account holders dies. There appears to be some confusion and misunderstanding about the procedure to be followed in respect of such accounts and the legal implications of the expressions ‘Either or Survivor’, ‘Latter of Survivor’, ‘Former or Survivor’ etc.
2. Joint Accounts
In the case of joint accounts (Current, Savings or Deposits) in the names of two or more persons, the terms relating to which do not provide for payment of the amount due under the account to the Survivor(s) in the event of death of one of them, for the banks to obtain a valid discharge payment should be made jointly to Survivor(s) and the legal heirs of the deceased joint account holder. In such a case, in view of the difficulty in ascertaining with certainty as to who the legal heirs of the deceased are, it is the practice of the banks to insist on the production of legal representation (to the estate of the deceased) before settling the claim. As obtaining a grant of legal representation would entail delay and expenses, banks should encourage the opening of joint accounts on terms such as, payable to (a) Either or Survivor, (b) Former/Latter or Survivor, (c) Anyone or Survivors, or Survivor, etc. This point has been emphasised in the Recommendation NO. 6 of the Working Group on Customer Service in banks.
3. Benefits of Survivorship
If the benefit of survivorship is provided, the survivor can give a valid discharge to the bank. Even though payment to the survivor will confer a valid discharge to the bank, the survivor will, however, hold the money only as trustee for the legal heirs (who may include the survivor as well) unless he is the sole beneficial owner of the balance in the account or the sole legal heir of the deceased. Thus, the survivor’s right unless he is the sole owner of the balance in the account/sole legal heir of the deceased, is only in the nature of a mere right to collect the money from the bank. If the legal heirs of the deceased lay a claim to the amount in the bank, they should be advised that in terms of the contract applicable to the account, the survivor is the person entitled to payment by the bank and that, unless the bank is restrained by an order of a competent court, the bank would be within its rights to make the payment to the survivors) named in the account. The position, briefly, is that a payment to survivor can be made if there are no orders from a competent court restraining the bank from making such payments.
4. Joint Savings Bank Account – Either or Survivor/
Any one or Survivors or Survivor
As stated in para 3 above, the survivor can give a valid discharge to the bank. If the legal heirs claim the amount, the bank can inform them that unless they obtain and have served on the bank an order of competent court restraining the bank from effecting payment to the survivor, the bank will be within its rights to do so.
5. Joint Term Deposit Account – Premature/Payment or Loan on death of one of the account holders
5.1 Account in the style of ‘Either or Survivor or ‘Anyone or Survivors or Survivor’
In a joint term deposit account which has been opened in the style of either or survivor/any one or survivors or survivor, the bank often receives a request, on the death of one of the joint account holders, from the surviving depositors) to allow premature encashment or the grant of a loan against the term deposit receipt. It would be in order to accede to the request of the surviving depositors) for premature payment if (i) there is an option included in the contract of deposit to repay before maturity and (ii) "either/any one or survivorship" man- date has been obtained from original depositors. Requests for loans from surviving depositor(s) could also be considered in special cases, though in the case of such loans, the bank may face a possible risk if the legal representatives of the deceased depositor lay an effective claim to the deposit before it is paid on maturity. In such an event, the bank will have to look to the borrower(s) for repayment. This position for premature payment or grant of loan is applicable also in respect of a joint account (in the style of either or survivor/any one or survivors or survivor), where all the account holders are alive.
As a measure of operational prudence, a clause to the effect that loan/premature payment can be permitted to either/any one of the depositors any time during the deposit period can, however, be included in the term deposit contract, i.e. the account opening or application form itself, in the manner indicated in para 6 below.
5.2 Joint Term Deposit – Former or Survivor/Latter or Survivor etc.
In the case of these term deposits, the intention of the owner depositor (former/latter) is to facilitate repayment of the term deposit to the survivor only in the event of his death. He (the owner depositor) is in a position to retain with him at all times, the right to dispose of the monies until his death or maturity of the deposit receipt, whichever is earlier. There should, therefore, be no objection to the bank permitting premature payment of such deposits or granting advances against them at the request of the former/latter without insisting on the production of a consent letter from the other party/parties to the term deposit receipt. Here also it is preferable to make this position explicit to the joint depositors, by incorporating suitable clause in the term deposit account opening or application form.
6. Special clause in the application/account opening form for Term Deposit Receipt
Banks may consider incorporating a clause to the following effect in the account opening form/application form establishing the contract of term deposit:
‘The Bank may, on receipt of written application from Shri -------------------- the former/the latter/the first name the second name etc. of us or Either or Survivor of us, in its Any one or Survivors of Survivor of us, absolute discretion and subject to such terms and conditions as the Bank may stipulate, (a) grant a loan/advance against the security of the term deposit receipt to be issued in our joint names or (b) make premature payment of the proceeds of the deposit to the former/the latter/the first named of us/either the second or survivor of us etc. named of us/any one of us or survivors or survivor of us".
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malipeddi jaggarao
(Expert) 06 March 2012
Thanks to Mr.Surendrakumar who brought all the problems in the joint account operational instructions of bank accounts. Also thanks to the expert Mr.Sethi who brought out the RBI circular to clear the doubts.
Mr.Surnedra, the practice of "either or survivor" operational instructions is a device to extend better customer service and hassle free withdrawal of the deposit as per the intention of the depositors. At the same bank has an obligation to follow up the local law and it should not land into trouble with its enthussiam in giving customer service. Nomally in joint accounts there is a presumption that the money belongs equally to all the joint account holders. If the premature closure is allowed by one of the depositors, the others are kept in dark. If it is allowed on maturity the other joint accounts holders have already the notice and they should be alert on their own. However, the above Circular brought out the solutions. You can ask your bankers to incorporate the additional last clause to suit your needs.
