What changed
RBI has permitted resident individuals to include non-resident close relatives (relatives as defined in Section 6 of the Companies Act, 1956) as joint account holders in their resident savings bank accounts. The joint holding is restricted to a 'former or survivor' basis, meaning the NRI cannot operate the account while the resident account holder is alive.
What it means for you
Banks should bring the contents of this circular to the notice of their constituents/customers concerned. This liberalisation simplifies estate planning for NRIs and residents, but banks need to ensure strict adherence to the non-operation condition during the resident's lifetime. It also requires careful KYC and monitoring to prevent misuse.
What you must do
- Update internal policies and account opening forms to include non-resident close relatives as joint holders on 'former or survivor' basis.
- Train branch staff on the new eligibility and operational restrictions for such joint accounts.
- Ensure systems flag that the NRI joint holder cannot operate the account during the resident's lifetime.
- Communicate the circular to all customers and relevant constituents.
Who it affects
Authorised Dealer (AD) banks, Resident individuals with NRI close relatives (as defined in Section 6 of the Companies Act, 1956), Non-resident Indians (NRIs) as defined in FEMA Notification No. 5 dated May 3, 2000, who are close relatives of residents
Can the NRI joint holder operate the account while the resident is alive?
No, the NRI joint holder is not eligible to operate the account during the lifetime of the resident account holder. The joint holding is only on a 'former or survivor' basis.
Who qualifies as a 'close relative' under this circular?
The circular refers to the definition of 'relative' under Section 6 of the Companies Act, 1956. Banks should verify the relationship as per that definition.
Does this circular apply to all types of resident bank accounts?
The circular specifically mentions 'resident bank accounts' and refers to savings bank accounts. It does not explicitly cover other account types, so banks should apply it only to savings accounts unless further clarified.