RBI asks urban co-operative banks to modify FD form

MUMBAI: The Reserve Bank today asked the urban co-operative banks to modify fixed deposit (FD) account opening form to allow pre-mature withdrawal in the event of death of one of the joint account holders without any penalty.

Under the modified norms, it would be easier for the surviving joint account holders of FD with 'either or survivor' or 'former or survivor' mandate to go in for pre-mature withdrawal of fixed deposit in the event of death of the other.

As per the notification of the Reserve Bank of India ( RBI), banks will have to incorporate a clause in the FD form to give option of premature withdrawal by survivor in case of death of the other joint account holder.

RBI had earlier asked UCBs to incorporate such a clause in the account opening form, however, it said, "UCBs which have neither incorporated such a clause in the account opening form nor taken adequate measures to make the customers aware of the facility of such mandate, cause unnecessary inconvenience to the 'surviving' deposit account holders(s).

"UCBs are, therefore, advised to invariably incorporate the aforesaid clause in the account opening form and also inform their existing as well as future term deposit holders about the availability of such an option."

The joint deposit holders may be permitted to give the mandate either at the time of placing fixed deposit or anytime subsequently during the term/tenure of the deposit.

"If such a mandate is obtained, banks can allow pre-mature withdrawal of term/fixed deposits by the surviving depositor without seeking the concurrence of the legal heirs of the deceased joint deposit holder," RBI said.

It further clarified that "such premature withdrawal would not attract any penal charge".