What changed
RBI issues new instructions superseding earlier circulars (1987, 2000) based on CPPAPS recommendations. Banks are now explicitly barred from insisting on legal documents like probate or indemnity bonds for accounts with nomination/survivorship. For accounts without nomination, banks may set a threshold for simplified settlement using only a letter of indemnity.
What it means for you
UCBs must avoid insisting on legal documents for nominated accounts to prevent supervisory disapproval. This reduces customer distress and operational friction, but banks need to strengthen identity verification and risk management for accounts without nomination. The circular applies to all deposit accounts, including term deposits, and requires clear communication to survivors about their trustee role.
What you must do
- Update internal policies to prohibit demanding succession certificates, probate, or indemnity bonds for accounts with valid nomination or survivorship clause.
- Consider setting a minimum threshold limit for accounts without nomination where claims can be settled with only a letter of indemnity, based on risk management.
- Train staff on the simplified procedure and ensure proper documentation of identity and death proof.
- Communicate to survivors/nominees that they receive payment as trustees for legal heirs, and that payment is a valid discharge of bank liability subject to identity/death proof and no court order.
Who it affects
Primary (Urban) Cooperative Banks, Deposit account holders and their families, Bank operations and customer service teams
Can we still ask for a succession certificate if the account has a nominee?
No. For accounts with a valid nomination or survivorship clause, banks must not insist on succession certificate, probate, or any bond of indemnity, regardless of the amount. Doing so invites serious supervisory disapproval.
What if the deceased depositor had no nomination or survivorship clause?
Banks may adopt a simplified procedure. Based on their risk management, they can set a minimum threshold limit for the account balance. Claims up to that limit can be settled with only a letter of indemnity from the legal heir.
Does this circular apply to term deposits?
Yes. The instructions cover all deposit accounts, including term deposits. For premature termination of term deposits of deceased depositors, the same simplified procedure applies.