RBI Rules On Joint Bank Accounts: What Happens To Deposits After One Holder Dies?

New Delhi: A joint bank account is a very popular tool used by scores of people for operating shared finances. However, it has been noticed that several people opt for a joint account without having a complete knowledge of how the account actually works.

In the case of a joint bank account holder’s death, the first question that arises is whether the funds in the account will now belong to the other account holder. Usually, several people assume that the surviving account holder automatically acquires full rights to the account and the money deposited in it, but in reality, this is not the case. The bank gives the money according to the instructions provided when both depositors opened the account.

According to guidelines set by the Reserve Bank of India (RBI), in the case of joint deposits, after one depositor dies, the bank may allow the surviving depositor(s) acting together to vary or cancel a subsisting nomination. This also applies to deposits with operating instructions like ‘either or survivor’. It may be noted that in the case of a joint deposit account, the nominee’s right arises only after the death of all the depositors.

Receiving Funds vs Ownership Rights

The RBI’s guidelines mention that the surviving account holder who receives the money from the bank does not become the owner of the amount, rather, the individual acts as a 'trustee' (custodian) for the deceased's legal heirs. If the deceased’s heirs have a rightful claim to the assets, they can claim them even after the bank deposits money into the account.

According to RBI rules, the consent and presence of both the surviving account holder and all legal heirs of the deceased are required to settle the funds held in the account.

Legally, no one should use the ATM or internet banking services after an account holder's death. Following an account holder’s death, the bank should be immediately informed. Under the RBI's customer service framework, banks must settle the claim and release the funds to the survivor or nominee within 15 days of submitting all necessary documents.

Fixed Deposits

If the mandate is ‘Former or Survivor’, the ‘Former’ alone can operate or withdraw the matured amount of the fixed term deposit when both depositors are alive. However, the signature of both depositors may be required if the deposit is to be paid before maturity. If the former expires before the fixed/term deposit matures, the ‘Survivor’ can withdraw the deposit on maturity. Premature withdrawal, however, requires the consent of both parties when both are alive, and the consent of the surviving depositor and the legal heirs of the deceased if one depositor has died.

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