Page 46 - Banking Finance September 2023

FEATURES

Death claims: How some banks still

pose hurdles

nominee of a bank account—savings or fixed her full name—was the nominee of her mother’s savings
A deposit— is liable to receive proceeds from the bank account and some fixed deposits with a leading public
said account on the demise of the account holder.
sector bank. Her mother suffered a cardiac arrest and died
This is as per the regulations of the Reserve Bank
of India (RBI). Yet, not all banks implement this rule in true when she came to visit her in the US in 2021. Her certificate
of death was issued by the department of health and mental
spirit and so nominees or legal heirs of account holders face hygiene city of New York. Lima visited India in February this
numerous challenges during death claim processing. This is year and submitted a death claim. The savings account had
true of some large banks, where each of the branches are periodic ECS transactions and was operative. The bank
dependent on the rules followed by the zonal and regional refused to accept the claim and demanded that the death
offices in blatant violation of RBI guidelines. certificate be adjudicated in the US and then notarized. This
stipulation, as per the bank’s own website, is applicable only
At such branches, the officials concerned demand irrelevant
to non-residential external (NRE) or non- resident ordinary
documents, claiming that it is in accordance with instructions
(NRO) account holders who die overseas.
sent by the lender’s legal department. Branch officials
choose not to respond to emails or letters which quote RBI Accordingly, Lima then submitted the death certificate, which,
guidelines or even their own policies (as hosted on their too, was refused by the bank in violation of the model
website). With internal grievance cells lacking independence operational procedure (MOP) adopted by its board of
and effectiveness; a lukewarm support under Integrated directors, and against the model customer rights policy
Ombudsman Scheme 2021 seems to be more of a formulated by Indian Banking Association (IBA). The bank’s
compliance requirement resulting in unnecessary customer service remained a mute spectator and its legal
harassment of account holders and their nominees. department opted not to reply to any letters or submissions.
Such was the case with Pawar, who did not want to disclose A plea to the chairman and independent board members
her first name—was the nominee of her son’s savings bank stating that a resident account owned by a resident Indian
account with a private sector bank (at Sri Ganganagar). cannot be subject to rules applicable to non-resident accounts
After her son’s death, the bank refused to accept her claim did not heed any response. The bank also did not acknowledge
application, citing that the nominee should obtain no a copy of return of income filed by Lima’s legal representative
objection certificates from two companies— her son was an on the earnings and a copy of income tax returns of the
authorized signatory at one the companies and a partner deceased in India. Sadly, the bank followed its own
at the other. Both these entities also had current accounts interpretation of deciding the residential status of a deceased
with the same branch of the bank and were debt free. When account holder and not as per Fema or income tax Act.
her claim was rejected, Pawar, a retired banker, threw the
Lima also faced a similar problem with another public sector
rule book at them on the relevance of nomination and
bank. Here though, her mother had two separate accounts in
immunity from the two accounts owned by independent
two different branches of this bank. While one branch accepted
entities. The branch manager, however, refused to get into
the death certificate (duly notarized in India) and processed
a dialogue, while the zonal and regional heads refused to
the claim, another branch (located barely 2km away) initially
meet the nominee or accept representation letters. Her
refused to accept the certificate. When questioned about the
claim is pending for more than six months now.
differential treatment at two different branches of the same
In another case, Lima—who too did not want to disclose bank, the lender quietly settled the claim. (Sourse: Mint)
46 | 2023 | SEPTEMBER | BANKING FINANCE