RBI Deceased Account Holder Directions 2025: Simplified Claim Settlement for Legal Heirs

The Reserve Bank of India issued comprehensive directions on 26 September 2025 titled 'Settlement of Claims in respect of Deceased Customers of Banks', requiring all commercial and cooperative banks to implement a simplified and time-bound framework for processing claims by legal heirs and nominees of deceased account holders. These directions, effective from 31 March 2026, address a long-standing grievance: the ordeal families face when attempting to access the bank accounts of deceased relatives. The new framework introduces graded procedures based on account type, eliminates excessive documentation requirements for smaller accounts, and imposes strict timelines on banks with penalties for non-compliance.

Accounts With Nomination or Survivorship Clause

Where a valid nomination is registered or the account is held with a survivorship clause (such as 'either or survivor' or 'former or survivor'), the claim process is significantly simplified. Banks are prohibited from demanding any additional legal documentation beyond three items: a duly completed claim form, the death certificate of the deceased, and officially valid identity proof of the nominee or survivor. No succession certificate, legal heir certificate, probate, or letter of administration can be demanded. The nominee or survivor is entitled to receive the funds solely on the basis of these three documents. Banks must settle such claims within 15 working days of receiving complete documentation. If a bank fails to meet this timeline, it will be liable for interest at the savings bank rate for the period of delay beyond the prescribed 15 days. This provision effectively penalises banks for bureaucratic delay and creates a financial incentive for timely processing.

Accounts Without Nomination: The Graded Approach

For accounts where no nomination or survivorship clause exists, the RBI has introduced a graded approach based on the aggregate amount across all accounts of the deceased at that bank. Where the total amount is below Rs 15 lakh for commercial banks (or Rs 5 lakh for cooperative banks), a simplified procedure applies. The claimants must submit a claim form signed by all legal heirs, the death certificate, identity proof, a bond of indemnity executed by the claimants, and a letter of disclaimer or no objection from non-claimant legal heirs. Importantly, the bank cannot insist on a succession certificate or legal heir certificate for claims below the threshold. For claims exceeding the threshold, or where there is a dispute among legal heirs, the bank may require a succession certificate issued by a competent court, a legal heir certificate issued by a revenue authority, or probate of a will or letter of administration. Banks must settle claims within 30 working days of receiving the succession certificate or other required legal document.

Nominee as Trustee: Clarifying a Common Misunderstanding

The RBI directions explicitly clarify a point that has historically caused confusion: a nominee is not the ultimate owner of the deceased's funds. The directions state that the nominee or survivor will be deemed to hold the proceeds as a trustee for all legal heirs. This aligns with the settled legal position established by the Supreme Court in cases such as Sarbati Devi v. Usha Devi (1984), where the Court held that nomination under banking law does not override the laws of succession. The nominee receives the funds as a custodian and must distribute them to the legal heirs in accordance with the applicable personal law or will of the deceased. This means that while the bank's obligation is discharged upon paying the nominee, the nominee is legally bound to account for the funds to the rightful heirs. Banks are required to inform nominees of this trustee obligation at the time of claim settlement. Any dispute between the nominee and other legal heirs regarding the distribution of funds is a civil matter to be resolved through appropriate legal proceedings, not through the bank.

Locker Contents, Fixed Deposits, and Other Products

The directions extend beyond savings and current accounts to cover fixed deposits, recurring deposits, and safe deposit lockers. For fixed deposits held by a deceased customer, the nominee or legal heir is entitled to premature encashment without penalty if they choose not to continue the deposit until maturity. For safe deposit lockers, the bank must allow the nominee or legal heir to access and retrieve the contents in the presence of a bank official, with a proper inventory prepared and signed by both parties. The bank cannot refuse access solely because the locker rent is overdue, though it may recover the outstanding rent from the locker contents or the claim amount. For loan accounts where the deceased was a borrower, the bank is entitled to adjust the outstanding loan amount from any deposits held before releasing the balance to the legal heirs. However, the bank cannot hold up the entire settlement process pending recovery of a disputed loan amount; the undisputed portion must be released within the prescribed timelines.

What Families Should Do to Prepare

The most effective step any account holder can take is to register a nomination for all bank accounts, fixed deposits, and lockers. This single action dramatically simplifies the claim process for family members and eliminates the need for costly and time-consuming succession certificates. Account holders should periodically review and update their nominations, especially after life events such as marriage, divorce, birth of children, or death of the existing nominee. Families dealing with a claim should approach the branch where the account is maintained with a certified copy of the death certificate and the nominee's identity proof. If the bank demands additional documents beyond what the RBI directions prescribe, the claimant should cite the specific RBI circular and, if necessary, file a complaint with the Banking Ombudsman. The new framework is designed to make claim settlement a straightforward administrative process rather than a protracted bureaucratic ordeal.