Page 39 - Banking Finance November 2022

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either or survivor//anyone of us/any two of us or survivors) the bank, at any point of time, is bound to honour the
In the event of death of any of the joint account holders customer specified mandate. Not doing so may translate to
before maturity date, the bank shall be free at the request a breach of contract.
of survivor(s), though not obliged (i) to transfer the deposit
account to any other branch of the bank, or (ii) to refund Notwithstanding various legal decisions, from time to time,
payment on such terms as it may decide or (iii) advance loan in disputed cases, upto 2011, such mandates were broadly
to the survivor(s) against the deposit before maturity and working smoothly and there was no apparent
discharge given by the survivor(s) in this regard shall give misunderstanding in the way such transactions were to be
the bank a valid discharge (Applicable to Joint Accounts).” conducted either at the bank branches or at their clients
level. It was accepted practice, which got thrown to the
The language of the above two samples clearly highlights winds with the 2011 direction of RBI, when the de facto E
that the banks were trying to cover all possibilities and or S survivorship clause as widely understood and practised
variables which could arise during the currency of a jointly had to be abandoned and applied de jure, pertinent only at
held fixed deposit. They were trying find a fine balance the time of maturity and not otherwise.
between being compliant with the law and keeping the
leverage function of the FDs intact. The ambit takes into Thus it is clear that banks are aware of the difficulties faced
account the practical problems which the banks and by customers on account of legal decisions and regulatory
customers would have faced while dealing with such directions. They have therefore taken due cognisance to
transactions for instance loan against the security of FD for protect not only their own interest but also of clients by
meeting personal liabilities. devising such forms and undertakings. In any case, in the
event of an interse dispute or discord between parties
Furthermore, it also gives recognition to the fact that an E
signing such clauses, unfettered freedom is always available
or S mandate, duly made by the joint holders, is essentially
to any of the co-signers to countermand and revoke the
in the nature of an arrangement of the depositors with the
mandate at any point of time. This will be effective in
bank. It is a contractually binding clause and shows the
cancelling the same, as transactions in dispute are usually
intent of the depositors as to the manner in which funds are
frozen as per banking practice, and protect the interests of
to be disposed off. In plain language, once a deposit is
the aggrieved party.
created and the mode of operation specified with
supporting documents duly executed by all the joint holders,
In conclusion, in order to make the survivorship clause
implementable in letter and spirit, aligned to customer
expectations and understanding, the authorities concerned
need to take a closer look at bringing about further
improvements in customers and banks ease and comfort in
handling joint accounts. Further, though in respect of new
deposits after 2011, the position may be expected to be
somewhat sorted out as banks have geared themselves up
to comply with RBI directives, gaps still exist as evidenced
by the incident pointed out in the beginning.

Such deposits opened prior to the 2011 instructions or auto
rolled over thereafter without any fresh documentation may
have fallen off the radar. Banks would have to initiate a drive
to convey the true facts of their mandates to this set of
customers, failing which branches and customers will have
to face complaints and inconvenience. Efforts at spreading
public awareness about changes in law, need to be stepped
up and all the parties concerned vis. the Govt., Regulators,
IBA and Banks have to share the responsibility.

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