We all open fixed deposits with banks − sometimes in joint names, sometimes with nominations, sometimes with neither. But will the money reach the intended hands without any hitches at a later date? Here’s the low-down on the rules regarding joint holdings and nominations, to help you make the right choice.

Action on death

Unlike common perception, premature withdrawal on death of a joint holder is not compulsory. The deposit can be allowed to mature and the money flows to the surviving depositor.

But if the surviving holder wants to withdraw the amount before maturity, the concurrence of the legal heir of the deceased holder becomes necessary. This becomes inconvenient when the surviving holders are not the legal heirs themselves, or these parties are not on good terms. To reduce this hassle, the RBI opened a window to work around this rule through a circular issued in 2011-12.

According to the circular, at the time of opening a joint fixed deposit or at any time subsequently, you can give a joint mandate to the bank stating that on the death of one holder, the survivor can withdraw the amount prematurely. This removes the bother of waiting for the go-ahead from the legal heirs.

The RBI has also put the onus on banks to intimate all existing customers about this new mandate. New deposit application forms are also supposed to carry this clause.

Apart from this, banks have made premature withdrawals on death more customer-friendly by not charging any penal interest.

Rules for withdrawal

When we make joint deposits on an ‘either or survivor’ mandate, it is generally intended for operational convenience.

But sometimes, this can get turned on its head. If you want to withdraw the deposit prematurely, banks will insist on signatures of both joint holders.

Even for deposits with a ‘former or survivor’ or ‘latter or survivor’ holding basis, the signatures of both holders are required for premature withdrawal.

It may also turn problematic if, on maturity, there’s some uncertainty – say, about whom to repay the amount to. In such cases too, banks may demand the signatures of both holders. It's best to clarify these points before making a deposit to avoid hassles later.

Nominee’s role

A joint holding doesn’t prevent you from having a nominee for the deposit. You can fill up a nomination form available with the bank anytime, giving the details of the nominee. Once you do this, banks are required to incorporate the clause “Nomination Registered” in the deposit receipts. The name of the nominee can also be included in the receipt. While minors can also be nominees, you cannot have more than one nominee.

For deposit accounts held jointly, the nominee comes into the picture and will receive the amount only if the joint holders die. Trouble in these cases usually arises when the nominee and legal heirs are different people. In such a situation, the bank will follow the nomination mandate, after which its responsibilities end. Legal heirs cannot lodge a claim for the money against the bank, but can do so against the nominee only.

Published on September 21, 2014