JAIIB AFB Unit 24 - Operational Aspects of Deposit Accounts

Current Accounts

Current Account is an account in which there is no limit on the no. of transactions that can be done in a day and are therefore also referred to as Transactional Accounts. These type of accounts are held neither for the purpose of Investment nor for the purpose of Savings but only for the convenience of the business as these accounts are the most liquid type of accounts.

Banks don't pay any interest on the amount lying in these accounts and in some cases also charge a small fee for the services they provide. These types of Bank Accounts are usually opened by businesses as there no. of transactions are on the higher side.

1. Current Accounts (C/As) can be opened by individuals, partnership firms, private and public limited companies, HUFs, societies, trusts, clubs, associations, Govt Departments etc.
2. No interest is payable on credit balances in Current Accounts.
3. The customers may receive the statements of account according to the frequency desired by them.
4. Cheque books are issued to all Current Account holders and all withdrawals should be made only through issue of cheques.
5. As per RBI directive, the applicant for Current Account should declare in the account opening form or separately that he/they is/are not enjoying any credit facility with any Bank and if he/they does/do enjoy any credit facility, he/they should declare full particulars thereof indicating the name of the Bank/branch concerned.

Main Features of Savings Bank Account

1. There is no restriction on the number and amount of deposits.
2. However, mandatory PAN details are required for doing cash transactions exceeding Rs.50,000.
3. Withdrawals are allowed subject to certain restrictions.
4. The money can be withdrawn either by cheque or withdrawal slip of the respective bank.
5. The rate of interest payable is between 4% to 6% p.a in India.
6. Saving account is of continuing nature. There is no maximum period of holding.
7. A minimum amount has to be kept on saving account to keep it functioning.
8. No loan facility is provided against saving account.
9. Electronic clearing System (ECS)/E-Banking/Net Banking/Mobile Banking facilities are available.

Eligibility to open Savings Bank Accounts

1. Individuals
2. Two or more persons in joint names
3. Associations or clubs if eligible as per RBI guidelines
4. Minor above 10 year
5. A bank should not open more than one SB account for the same person in his individual name
6. If joint accounts, operating instructions and survivorship should be obtained

Prohibited to open Savings Bank Account

1. Government Departments
2. Municipal corporations
3. Municipal Committees
4. Panchayat Samitis
5. State Housing Boards
6. Water and Sewerage/Drainage Boards
7. State Text BookPublishing Corporations
8. Societies
9. Metropolital Development Authority
10. State/District level Housing Co.op Socieities
11. Any trading business or professional concern
12. Political Party 

The above prohibition will not apply in case they are eligible as per RBI guidelines.

Unclaimed Deposits and Inoperative/ Dormant Accounts

1. In view of the increase in the amount of unclaimed deposits with banks year after year and the inherent risk associated with such deposits, it is felt that banks should play a more pro-active role in finding the whereabouts of the account holders whose accounts have remained inoperative. Keeping these factors in view, Banks may follow the instructions detailed below while dealing with inoperative/dormant accounts:

2. Banks should carry out an annual review of accounts in which there are no operations for more than one year. The banks may approach the customers and inform them in writing that there has been no operation in their accounts and ascertain the reasons for the same.

3. 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.

4. In case the whereabouts of the customers are not traceable, banks should consider contacting the persons who had introduced the account holder. They could also consider contacting the employer/or any other person whose details are available with them. They could also consider contacting the account holder telephonically in case his telephone number / Cell number has been furnished to the bank. In case of Non Resident accounts, the bank may also contact the account holders through email and obtain their confirmation of the details of the account.

5. A savings as well as current account should be treated as inoperative/dormant if there are no transactions in the account for over a period of two years.

6. In case any reply is given by the account holder giving the reasons for not operating the account, banks should continue classifying the same as an operative account for one more year within which period the account holder may be requested to operate the account. However, in case the account holder still does not operate the same during the extended period, banks should classify the same as inoperative account after the expiry of the extended period.

7. For the purpose of classifying an account as 'inoperative' both the type of transactions i.e. debit as well as credit transactions induced at the instance of customers as well as third party should be considered. However, the service charges levied by the bank or interest credited by the bank should not be considered. Interest on Fixed Deposit account is credited in the Savings Bank accounts as per the mandate of the customer, the same could be treated as a customer induced transaction and the account should be treated as operative account as long as the interest on Fixed Deposit account is credited to the Savings Bank account.

8. Further, the segregation of the inoperative accounts is from the point of view of reducing risk of frauds etc. However, the customer should not be inconvenienced in any way, just because his account has been rendered inoperative.

9. Operation in such accounts may be allowed after due diligence as per risk category of the customer. Due diligence would mean ensuring genuineness of the transaction, verification of the signature and identity etc.

10. There should not be any charge for activation of inoperative account.

11. Banks are also advised to ensure that the amounts lying in inoperative accounts ledger are properly audited by the internal auditors/statutory auditors of the bank.

12. Interest on savings bank accounts should be credited on regular basis whether the account is operative or not. If a Fixed Deposit Receipt matures and proceeds are unpaid, the amount left unclaimed with the bank will attract savings bank rate of interest.

Basic Savings Bank Deposit Account (BSBDA)

Banks are advised to offer a ‘Basic Savings Bank Deposit Account’ which will offer following minimum common facilities to all their customers:

1. The BSBAD should be considered a normal banking service available to all.
2. This account shall not have the requirement of any minimum balance.
3. The services available in the account will include deposit and withdrawal of cash at bank branch as well as ATMs; receipt/credit of money through electronic payment channels or by means of deposit/collection of cheques drawn by Central/State Government agencies and departments;
4. While there will be no limit on the number of deposits that can be made in a month, account holders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals;
5. Facility of ATM card or ATM-cum-Debit Card;
6. The above facilities will be provided without any charges.  Further, no charge will be levied for non-operation/activation of in-operative ‘Basic Savings Bank Deposit Account’.
7. Banks would be free to evolve other requirements including pricing structure for additional value-added services beyond the stipulated basic minimum services on reasonable and transparent basis and applied in a non-discriminatory manner.
8. The BSBDA would be subject to RBI instructions on Know Your Customer (KYC) / Anti-Money Laundering (AML) for opening of bank accounts issued from time to time.
9. If such account is opened on the basis of simplified KYC norms, the account would additionally be treated as a ‘Small Account’ and would be subject to conditions stipulated for such accounts.
10. Holders of BSBDA will not be eligible for opening any other savings bank deposit account in that bank. If a customer has any other existing savings bank deposit account in that bank, he/she will be required to close it within 30 days from the date of opening a BSBDA.
11. The existing basic banking ‘no-frills’ accounts should be converted to BSBDA. 

Photographs of Account Holders

1. The banks should obtain photographs of the depositors/account holders who are authorised to operate the accounts at the time of opening of all new accounts. The customers' photographs should be recent and the cost of photographs to be affixed on the account opening forms may be borne by the customers.
2. Only one set of photographs need be obtained and separate photographs should not be obtained for each category of deposit. The applications for different types of deposit accounts should be properly referenced.
3. Photographs of persons authorised to operate the deposit accounts viz. S.B. and Current accounts should be obtained. In case of other deposits viz. Fixed, Recurring, Cumulative etc. photographs of all depositors in whose names the deposit receipt stands may be obtained, except in the case of deposits in the name of minor, where guardians' photographs could be obtained.
4. The banks should also obtain photographs of ‘Pardanashin’ women.
5. The banks should also obtain photographs of Non-Resident (External) (NRE), Non-Resident Ordinary (Rupee) (NRO), Foreign Currency Non-Resident (FCNR) account holders.

Accounts with survivor/ nominee clause

In the case of deposit accounts where the depositor had utilised the nomination facility and made a valid nomination or where the account was opened with the survivorship clause ("either or survivor", or "anyone or survivor", or "former or survivor" or "latter or survivor"), the payment of the balance in the deposit account to the survivor(s)/nominee of a deceased deposit account holder represents a valid discharge of the bank's liability provided:

1. The bank has exercised due care and caution in establishing the identity of the survivor(s)/nominee and the fact of death of the account holder, through appropriate documentary evidence;
2. There is no order from the competent court restraining the bank from making the payment from the account of the deceased

3. It has been made clear to the survivor(s)/nominee that he would be receiving the payment from the bank as a trustee of the legal heirs of the deceased depositor, i.e., such payment to him shall not affect the right or claim which any person may have against the survivor(s)/nominee to whom the payment is made.

It may be noted that since payment made to the survivor(s)/nominee, subject to the foregoing conditions, would constitute a full discharge of the bank's liability. Therefore, while making payment to the survivor(s)/nominee of the deceased depositor, the banks are advised to desist from insisting on production of succession certificate, letter of administration or probate, etc., or obtain any bond of indemnity or surety from the survivor(s)/nominee, irrespective of the amount standing to the credit of the deceased account holder.

Accounts without the survivor/nominee clause

In case where the deceased depositor had not made any nomination or for the accounts other than those styled as "either or survivor" (such as single or jointly operated accounts), banks are advised to adopt a simplified procedure for repayment to legal heir(s) of the depositor keeping in view the imperative need to avoid inconvenience and undue hardship to the common person.  In this context, banks may, keeping in view their risk management systems, fix a minimum threshold limit, for the balance in the account of the deceased depositors, up to which claims in respect of the deceased depositors could be settled without insisting on production of any documentation other than a letter of indemnity.

Operating Instructions on Joint Accounts

Banks should encourage the opening of joint accounts on terms such as, payable to

(a) Either or Survivor
(b) Former or Survivor
(c) Later or Survivor
(d) Anyone or Survivors, or Survivor

Salient features of Nomination

1. Nomination facilitates faster and easier release of funds/articles without insistence on Succession Certificate/Probate of Will.
2. Nomination facility is available to accountholders operating current accounts, savings bank accounts and all types of term deposit accounts, safe deposit lockers or safe custody of articles.
3. Nomination facility is intended for individuals only.
4. Nomination can be made in favour of one person only. It can be made in existing or new accounts and can be cancelled or changed subsequently by the depositors.
5. Nomination cannot be made in accounts where deposits are held in a representative capacity e.g. trust accounts etc. and in accounts of partnership firms, H.U.F., companies, associations, clubs etc.
6. In case of a joint account of individuals, nomination should be made by all depositors jointly.
7. In case of minor's account whether self operated or otherwise, nomination should be made by a person lawfully entitled to act on behalf of the minor.
8. Nomination favouring the minor is permitted on the condition that the account holder, while making the nomination, appoints another individual, not being a minor, to receive the amount of the deposit on behalf of the nominee in the event of the death of the depositor during the minority of the nominee. Date of birth of minor be obtained and noted.
9. A nomination will continue to be in force even on renewal of term deposit, unless specifically cancelled or changed.
10. Name of existing nominee in respect of specific Term Deposit Receipt will not be added for subsequent deposit receipts. Separate nomination will be obtained for each deposit receipt.
11. Nomination facility is available for savings bank accounts opened for credit of pension. However, Banking Companies (Nomination) Rules,1985 are distinct from the Arrears of Pension (Nomination) Rules,1983 and the nomination exercised by the pensioner under the latter rules for receipt of arrears of pension will not be valid for the purpose of deposit accounts held by the pensioners with banks, for which a separate nomination is necessary in terms of the Banking Companies (Nomination) Rules, 1985 in case a pensioner desires to avail of nomination facility.
12. A non-resident can be nominated as a nominee in a resident account. In case of non-resident nominees, the amount entitled to him from the account(s)/deposit(s) of a deceased person, will be credited to his NRO account.

Safe custody of articles:-

1. Nomination can be made in favour of one individual only.
2. Where the nominee is a minor, the customer shall, while making the nomination, appoint another individual not being a minor, to receive the articles on behalf of the nominee, in the event of the death of the customer during the minority of the nominee.
3. Nomination facilities are available only in case of individual depositors and not in respect of persons jointly depositing articles for safe custody.

Safe deposit lockers:-

1. In case of a sole hirer of a safe deposit locker, nomination can be made in favour of only one individual.
2. Where the safe deposit locker is hired from the bank by two or more individuals, nomination can be made in favour of one or more persons.
3. Where the safe deposit locker is hired in the name of a minor, the nomination shall be made by a person lawfully entitled to act on behalf of the minor.
4. A minor can be appointed as a nominee for delivering contents of a hired locker. Section 45 ZE of the Banking Regulation Act, 1949 does not preclude a minor from being a nominee, for obtaining delivery of the contents of a locker. However, the bank in such cases,  when the contents of a locker are sought to be removed on behalf of the minor nominee,  hand over the articles  to a person who, in law is competent to receive the articles on behalf of the minor.