Here is a real-life story of legal heirs of a deceased, who successfully managed to claim a matured fixed deposit along with compound interest after 15 years
What happens when someone, in absence of a nominee, dies before the fixed deposit is matured? Most of the times, the legal heirs are clueless as to what assets the deceased held and the process to deal with claiming the same from financial institutions. One of our readers brought to us an interesting case.
A family had found out about the deceased assets, in this case—a fixed deposit (FD) with Syndicate Bank, only after 15 years, while combing through the last remnants of a trunk left in their attic. This situation is quite common not just in India but all over the world.
So what happens to the fixed deposit in such a case?
The simple case would be that the assets would be transferred to the nominee. However, we learn that, in the 1970s, nomination facilities weren’t readily available. In fact, one had to ask for it. Thus the deceased was probably not aware of such a facility. Moreover, the family wasn’t aware that the deceased held a FD.
Usually, Syndicate Bank would have to notify the depositor, whether alive or dead, on the maturity of the FD. In some cases, these letters go unnoticed as there may not be anyone residing after death and the relatives might be living elsewhere.
We found out that according to RBI: “If the letters are returned undelivered, they may immediately be put on enquiry to find out the whereabouts of customers or their legal heirs in case they are deceased.”
Therefore, if the bank does not hear from the depositor for a period of time, it must use whatever methods at disposal to track down its legal heirs.
When this family found out about the existence of the FD, they approached Syndicate Bank in order to claim the FD, along with stipulated interests. However, the family was “bullied” by the Bank for not taking measures to claim the FD at time of death of the depositor. What was surprising was that the deceased lived one floor below Syndicate Bank’s office! The Bank might have been aware of the death of the depositor, but had not bothered to track and inform the legal heirs of the same. Instead, they had virtually used the depositor’s FD for “free”.
This isn’t the only peculiarity with FDs and death before its maturity. We learn that there’s another issue—the question of how much the legal heirs are entitled to the interests and FDs.
According to Syndicate Bank: “....In the case of death of the depositor after the date of maturity of the deposit, the bank shall pay interest at savings deposit rate obtaining on the date of maturity from the date of maturity till the date of payment.”
The logic in this case is that the fixed deposits had matured when depositor died, and thus Time Deposit had become Demand Deposit (i.e. savings bank). Therefore, if the FD is not claimed within due time, it will be converted to a savings bank account and only the savings rate would apply henceforth.
However, it is different in case the depositor dies before maturity, as in this case, “In the event of death of the depositor before the date of maturity of deposit and amount of the deposit is claimed after the date of maturity, the Bank shall pay interest at the contracted rate till the date of maturity. From the date of maturity to the date of payment, the Bank shall pay simple interest at the applicable rate obtaining on the date of maturity, for the period for which the deposit remained with the Bank beyond the date of maturity; as per the Bank's policy in this regard.”
The key word here is “simple interest at the applicable rate”. What does the simple interest means? Is it savings rate? Or a rate decided by the bank without the knowledge of the depositor’s legal heirs? The wording used here gives the bank the freedom to choose whatever rate it prefers, which will be usually less than the contracted rate.
Syndicate Bank had offered the legal heirs savings rate instead of the contracted rate, thus trying to fleece its customers.
What do we learn from this episode?
Simple, customers are taken for granted by the banks. Most of the times, the customers are short-changed without their knowledge, even in the simplest of cases. In this case, the Bank failed to take cognizance the fact that the FD was taken in the 1970s, where rules and banking practices were different then. It is the bank’s duty and responsibility to ensure that common sense be applied to cases such as these and adapt it accordingly within the framework today in such a manner that is fair to the legal heirs.
Also, there ought to be a solution to communicate better to the legal heirs of the deceased, which would not only make the bank’s job of tracking down legal heirs much easier, but also serve customers better. While the employees of Syndicate Bank in the 1970s and 1980s may have failed in their duties, the bank had no right to bully the legal heirs because of some lapse of its own employees many years ago.
Fortunately, despite all this, we learn that the legal heirs have managed to obtain a succession certificate as well as a court order stating that Syndicate Bank must pay compound interest at the contracted rate, but only after a lot of hard work done by them.
Although the hallmarking for yellow metal is been made mandatory by the Indian government, it will take at least a year for it to be implemented across the country
The Indian ministry of consumer affairs recently approved a proposal making hallmarking of gold, mandatory. The industry has welcomed the decision however sources within the ministry say that it will be at least 12 months before it can be implemented across the county.
Consumer activists have also expressed their reservations on the process of hallmarking of gold in India. AR Shenoy, a Mumbai-based consumer activist, said, “The concept of hallmarking is good. But the implementation is a big issue. The Bureau of Indian Standards (BIS) does not have required infrastructure for gold testing. At times it is outsourced to the third party.”
“There are cases in the market where gold which is not 916 gold or 22 carat, is being Hallmarked as pure or 24 carat. I knew an agent who shut down his business of Hallmarking gold because he was pressurised by jewellers and pertinently asked to give 916 gold certifications to the yellow metal which was of lesser purity,” Mr Shenoy added.
The union cabinet cleared the proposal by approving amendments to the BIS Act, 1986, that aims to expand the ambit of mandatory Hallmarking to include more products, including gold. Currently, Hallmarking of gold, giving it a purity certificate, is not mandatory. The BIS, under the ministry is the administrative authority of Hallmarking.
According to reliable sources from the ministry, though the hallmarking for yellow metal is been made mandatory, it will take at least a year to see the results on the ground.
Players from the gold jewellery industry have welcomed this move. Karan Vasa, associate vice president, RiddiSiddhi Bullions Ltd, says, “Given the prices of gold, which are skyrocketing, Hallmarking would provide a cushion of assurance to the customers. From the re-selling point of view, Hallmarking is a great move. In future, if customers want to re-sell their Hallamarked gold jewellery, it will become easier.”
When asked about the implementation among the widely spread gold jewellery stores and makers in the local market, Mr Vasa explained, “Given the size of our country, it will take time for proper implementation. For this, there should be awareness among the consumers who would then demand hallmarked gold from their jewellers.”
Rajesh Export Ltd, a leading gold jewellery manufacturer while welcoming the move said, “The major challenge would be for the government to implement the law and enforce strict punishment and deterrents for jewellers violating the law by selling jewellery without Hallmark or with spurious Hallmark.”
Muthoot Finance Ltd, country’s largest gold company says this move will bring in more transparency. “We as a gold loan company would benefit out of the increased demand for gold in this country post BIS mark made it compulsory since the quality of gold ornaments being pledged by customer for their loans would be much better,” says George Alexander Muthoot, managing director, Muthoot Finance, in a release.
At present, about 77 items, including cement, mineral water and milk products, are certified through mandatory Hallmarking under the BIS Act for conformity with expected quality levels. The BIS Hallmark, a mark of conformity widely accepted by the consumer, bestows the additional confidence to the consumer on the quality of products like gold jewellery.
The development will help domestic companies to raise funds from overseas markets at better rates. The latest upgrade comes less than a month after Moody’s had upgraded the credit rating of Indian government’s bonds from speculative to investment grade
New Delhi: Global agency Moody’s today upgraded India’s short-term foreign currency rating from speculative to investment grade, a development which will help domestic companies to raise funds from overseas markets at better rates, reports PTI.
“... there has been another upgrade by Moody’s with the short-term country ceiling on foreign currency bank deposit increasing from NP (not prime) to Prime (P-3), suggesting acceptable ability to repay short-term obligations,” the finance ministry said.
The ‘P-3’ ratings suggest acceptable ability to repay short-term obligations.
The latest upgrade comes less than a month after Moody’s had upgraded the credit rating of Indian government’s bonds from speculative to investment grade, a move that was expected to encourage FIIs to increase their exposure in gilts and help companies raise funds from abroad at competitive rates.
On 20th December last year, Moody’s had upgraded short term government bonds denominated in domestic currency from NP to P-3.
Moody’s had upgraded rating on long-term government bond denominated in domestic currency from Ba1 to Baa3 or from speculative to investment grade.
Besides, the long-term country ceiling on the foreign currency bank deposit was also upgraded from Ba1 to Baa3.
Giving a rationale for the upgrade in December, Moody’s had at that time said, “Diverse sources of Indian growth have enhanced its resilience to global shocks”.
It had added the present slowdown “could reverse sometime in 2012-13, as inflation cools from current 9% levels”.
The finance ministry had approached the ratings agency seeking clarification regarding the ‘short-term country ceiling on foreign currency bank deposit’, which had not found mention in the earlier decision by Moody’s.
According to the ministry, the ratings firm has sent it a mail affirming an upgrade in that front as well.
“The Department of Economic Affairs (DEA) will continue to engage rating agencies on regular basis to impress upon them the long-term structural strengths and sound fundamentals of the Indian economy,” joint secretary in the capital markets division of the DEA Thomas Mathew said.
Presently, six sovereign ratings agencies—Standard & Poor’s, Moody’s, DBRS, Fitch, Japanese Credit Rating Agency and the Rating and Investment Information Inc—assigns ratings to India.