In case of FDs with ‘either or survivor’ mandate, banks are permitted to allow premature withdrawal of the deposit by the surviving joint depositor on the death of the other if there is a joint mandate from the joint depositors to this effect
The Reserve Bank of India (RBI) issued a clarification with regard to premature repayment of fixed deposits on 17 August 2012. The RBI circular says, in case of term deposits with an ‘either or survivor’ or ‘former or survivor’ mandate, banks are permitted to allow premature withdrawal of deposits by the surviving joint depositor on the death of the other, only if there is a joint mandate from the joint depositors to this effect.
Banks had been advised to incorporate a clause in the account opening form that in the event of death of the depositor, premature termination of term deposits would be allowed, subject to the conditions mentioned. Banks were also advised to widely publicise this and provide guidance to deposit-holders. However, most banks have neither incorporated such a clause in the account opening form nor taken adequate measures to make customers aware of the existence of such a mandate.
Joint deposit-holders can give this mandate either at the time of making an FD or anytime subsequently during the term of the deposit. If such a mandate exists, banks can allow premature withdrawal of FD by the surviving depositor without a penal charge.