Page 38 - Banking Finance November 2022

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needless to say, is possible only while the depositors are
alive.

Since the common man is unlikely to keep a close tab on
court/legal outcomes or lack adequate legal knowledge and
access to such advice, it was incumbent on the banks to
make depositors aware of the legal position of the
survivorship clause. However as there is always a lag
between the instruction, it’s implementation, circularisation
and application, the RBI after taking cognisance of the legal
implications and interpretation by the courts, advised banks
to incorporate in their deposit account opening forms a
suitable undertaking to take care of this proviso. Pending
the printing and supply of new account opening forms to
bank branches, as an interim measure some banks put in
place a Revised E or S form to be obtained at the time of
making a joint deposit to be taken separately along with the The pertinent clause in this document reads : “With
existing account opening form. This would have covered all reference to the captioned account jointly held by us with
the bases so to speak and prevent customer dissatisfaction the ‘E or S’ or ‘Anyone or Survivor(s)’ mode of operation,
in the event of some official inadvertently or otherwise we advise that the bank may pay to anyone of us, any day
failing to explain the implications of the mode of operation either before or on due date, on or after due date and
to the depositor. where no due date is fixed, on demand, the principal along
with interest. Payment to any one of us is discharge from
While new deposits may be covered under the built-in all of us, until you receive a notice contrary to it from both/
customer declaration incorporated in the account opening all of us. In case of death of any one, amount be paid to
form itself, it may be noted that this covers only cases where survivor(s)”
a joint holder is deceased. Around mid-2019, IBA drew up
and circulated a common/universal account opening form The declaration in the account opening form of PNB is even
for use by public sector banks which provides for premature more comprehensive as it includes account transfers and
payment to the survivor in the event the other holder is no loans also. This appears as:
more. However it is silent on the course of action during
the currency of their lives. It would appear that the E or S “In case of Joint Fixed Deposit Account: The Bank may on
mandate given in FDs will not apply for transactions, unlike receipt of written application form either/anyone/any two
that in a SB account, while the joint holders are alive. In account Holder(s) in its absolute discretion and subject to
other words, if one of the holders wishes to take premature such terms and conditions as it may stipulate (i) transfer the
payment or a loan against the deposit it will necessarily entail deposit account to any other branch of the Bank, (ii) grant
signatures and discharge from all the holders. a loan/ Advance against the security of the term deposit or
(iii) allow premature withdrawal / make premature
The E or S mandate will be a non-starter. This goes against payments of the deposit to either/ anyone/ any two Account
the spirit of the E or S mode of operation and defeats the Holder(s). The Bank shall be entitled to adjust and
purpose of stipulating the same at the time of opening a joint appropriate the proceeds of the deposits on or after
deposit. The public at large is likely to be confronted with a maturity or before maturity by cancellation under the advice
dichotomy between their belief and ground reality. The way to the customer.
out would be to recast the customer declaration/undertaking
to cover any such transaction in jointly held FDs. The language Towards dues with interest in respect of loan/ advance so
used by SBI in their Revised E or S form, being taken prior to given against the security of the deposit. The receipt /
incorporation in their account opening forms, appears quite discharge given by anyone/ any two account Holder(s) shall
appropriate and may be taken as a guide-post. give the bank a valid discharge. (Applicable only in case of

38 | 2022 | NOVEMBER | BANKING FINANCE