Module: | KYC, NPAs, Advances & Investment Valuations
Q192: Scenario: Mr. X and Mrs. Y hold a joint term deposit with a 'Former or Survivor' mandate. Mrs. Y (the Survivor) requests a premature withdrawal to cover an emergency while Mr. X is still alive. Later, law enforcement authorities freeze another term deposit held individually by Mr. X, which matures during the freeze period without any renewal instructions from him. Based on RBI guidelines, consider the following statements regarding the correct regulatory actions:
1. The bank must permit Mrs. Y to prematurely withdraw the 'Former or Survivor' term deposit without Mr. X's signature, as she is a joint holder.
2. Premature withdrawal of the 'Former or Survivor' deposit requires the explicit consent and signatures of both Mr. X and Mrs. Y while both are alive.
3. The bank must automatically renew Mr. X's frozen term deposit for a term equal to the original term to prevent loss of interest.
4. The bank must transfer the matured proceeds of the frozen term deposit to a suspense account until the law enforcement freeze is lifted.
Which of the statements given above is/are correct?
2. Premature withdrawal of the 'Former or Survivor' deposit requires the explicit consent and signatures of both Mr. X and Mrs. Y while both are alive.
3. The bank must automatically renew Mr. X's frozen term deposit for a term equal to the original term to prevent loss of interest.
4. The bank must transfer the matured proceeds of the frozen term deposit to a suspense account until the law enforcement freeze is lifted.
Which of the statements given above is/are correct?
✅ Correct Answer: B
The correct answer is B. Statement 1 is incorrect and Statement 2 is correct because the 'Former or Survivor' mandate strictly allows the 'Former' (Mr.
X) to operate the account alone upon maturity.
However, for a premature withdrawal while both parties are still alive, regulatory rules require the bank to obtain the joint signatures and explicit consent of both account holders; the survivor cannot unilaterally break the deposit.
Statement 3 is correct and Statement 4 is incorrect because the guidelines dictate a strict protocol for term deposits frozen by law enforcement.
If the depositor provides no specific instructions, the bank is legally obligated to automatically renew the deposit for a term exactly equal to the original term to protect the customer's financial interest.
Moving such funds to a non-interest-bearing suspense account is strictly unauthorized.
X) to operate the account alone upon maturity.
However, for a premature withdrawal while both parties are still alive, regulatory rules require the bank to obtain the joint signatures and explicit consent of both account holders; the survivor cannot unilaterally break the deposit.
Statement 3 is correct and Statement 4 is incorrect because the guidelines dictate a strict protocol for term deposits frozen by law enforcement.
If the depositor provides no specific instructions, the bank is legally obligated to automatically renew the deposit for a term exactly equal to the original term to protect the customer's financial interest.
Moving such funds to a non-interest-bearing suspense account is strictly unauthorized.