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Banks May Face Penalties for Delays in Settling Claims of Deceased Customers from January 2026
Moneylife Digital Team 08 August 2025
Consumer Interest
The Reserve Bank of India (RBI) has proposed a landmark framework to ensure that families of deceased bank customers are not made to run from pillar to post to access their loved one’s money or valuables. The RBI (Settlement of Claims in respect of Deceased Customers of Banks) Directions, 2025, issued in draft form, will take effect from 1 January 2026 and will be applicable to all commercial and cooperative banks. 
 
For the first time, banks that delay settling such claims beyond 15 calendar days from the receipt of all necessary documents will have to compensate the claimants. In the case of deposit accounts, the penalty will be in the form of interest at a rate not less than the prevailing bank rate plus 4% per annum for the period of delay. If the delay involves lockers or articles kept in safe custody, banks will be required to pay Rs5,000 for each day beyond the prescribed timeline.
 
RBI’s directions lay out a harmonised, standardised procedure for settling claims, aiming to end the confusion and inconsistent practices currently followed by banks. The draft circular has proposed that when an account or locker has a valid nomination or a survivorship clause, the bank must release the funds or give access to the contents without insisting on legal documents such as a succession certificate, probate of will or indemnity bonds, regardless of the amount involved. In such cases, the nominee or survivor only needs to furnish a claim form, the death certificate and officially valid proof of identity and address. Banks must make it clear that the payment or access is given to the nominee as a trustee for the legal heirs, and does not confer ownership rights over the assets.
 
When there is no nomination or survivorship clause, banks must follow a simplified process for claims up to a threshold of at least Rs15 lakh. This will involve submission of a claim form, the death certificate, proof of identity and address, a bond of indemnity from the claimants (without requiring third-party sureties), no-objection letters from other legal heirs where applicable, and a legal heir certificate or a declaration from an independent person known to the family. Claims above this threshold may require additional legal documentation such as a succession certificate or an affidavit sworn before a judicial authority, along with third-party surety.
 
For lockers and safe custody articles, the rules closely mirror those for deposit accounts. If there is a nomination or survivorship clause, banks must verify documents, ensure no court orders restrain access, and prepare a detailed inventory of the contents in the presence of the claimants, two independent witnesses and designated bank officials before handing over the items. Where there is no nomination, the same inventory procedure will apply, but a bond of indemnity from all legal heirs will also be required. Any disputes among heirs will need to be resolved through court orders before the bank can act.
 
The framework also contains several consumer-friendly provisions that address long-standing irritants. Any amounts credited to the account after the depositor’s death, referred to as “pipeline flows”, may be transferred to a special estate account or returned to the remitter, based on the claimant’s authorisation. Term deposits can be closed prematurely without penalty in the event of the depositor’s death, even during a lock-in period. For missing persons, claims will be processed once a court presumes death under the Bharatiya Sakshya Adhiniyam, 2023, with a simplified process for smaller amounts based on a first information report and a police “non-traceable” report. 
 
RBI has also encouraged banks to accept claims online, provide status tracking facilities and make standardised claim forms and checklists available at all branches and on their websites. The draft circular makes an effort to provide sample formats of application forms for settlement of claims, indemnity bonds, declarations or affidavits, and inventory forms for the contents of safe deposit lockers, etc. In addition, banks must publicise the benefits of making nominations and the procedures for claim settlement.
 
This move comes amid a steady rise in unclaimed deposits, much of which is due to banks’ reluctance to release funds promptly, even in straightforward cases. Moneylife Foundation has, for years, campaigned for a time-bound settlement process backed by penalties on banks for delays. This was a key recommendation in a presentation by Moneylife Foundation’s founder-trustee, Sucheta Dalal to the RBI’s Kanungo Committee on Customer Service in Banks, where she highlighted how the absence of penalties encouraged banks to indefinitely delay claim settlements, leaving rightful heirs in distress. While the draft RBI framework now includes exactly such penalties—interest at bank rate plus 4% for deposits and Rs5,000 per day for lockers—Moneylife Foundation has also worked on a range of other transmission and unclaimed asset reforms.
 
RBI’s proposed framework addresses many of the concerns that have been raised by Moneylife, by making timelines and penalties mandatory and by eliminating unnecessary paperwork in cases where nominations exist. The directions put out by the regulator are currently in draft form and the central bank has invited comments from the public, industry bodies and other stakeholders before finalising the framework. Comments can be submitted online - https://www.rbi.org.in/scripts/Bs_Connect2Regulate.aspx or through email to [email protected]. 
 
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Comments
noelb
6 months ago
A step in the right direction. If only RTAs were subject to similar penalties when delaying transmission of assets to nominees and legal heirs for the stupidest of reasons, I would not have so many grey hairs on my head!
Reply
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