RBI seeks to standardise death claim settlements, ease process for nominees

The standardised process will focus on three key areas: regular bank accounts, items held under safe custody, and contents of safe deposit lockers.

The Reserve Bank of India (RBI) has taken a significant step toward easing the burden on nominees and legal heirs of deceased depositors. On August 6, RBI Governor Sanjay Malhotra announced a proposal to standardise procedures and documentation for accessing funds in bank accounts, safe deposit lockers, and items held in safe custody. This initiative aims to streamline the claims process, reduce administrative hurdles, and provide clarity during a challenging time for grieving families.

The current challenges

The process of settling claims for deceased depositors has long been fraught with complexities. According to Sneha Makhija, Head of Wealth Planning at Sanctum Wealth, “Banks often required additional documents, such as letters of indemnity, before releasing funds, especially when the value exceeded a specific threshold.” This lack of uniformity across financial institutions creates significant obstacles for nominees and heirs. Varying internal policies, multiple documentation requirements, and inconsistent procedures between banks lead to confusion and delays.

Shailendra Dubey, Partner at PlanMyEstate Advisors LLP, highlights the lack of standardised processes, stating, "currently, the banks can have their own set of documents (indemnity bond, proof of relationship, death, affidavits), paperwork, and procedure while settling claims.” This variability often results in a time-consuming and emotionally taxing experience for bereaved families.

Additionally, legal and procedural hurdles, such as verifying nominee legitimacy or navigating intestate succession, further complicate the process. Rajat Dutta, founder of Inheritance Needs Services, points out operational inefficiencies, noting, “Even though every bank has a board-approved policy for death claim settlement… none of the banks unfortunately follow or adhere to the same.” He cites an example where heirs faced difficulties obtaining account details due to banks citing client confidentiality, even when the information was needed for court filings.

Technological limitations also exacerbate the issue. Dutta adds, “With digital age banking systems, the death claim still needs to be submitted in the home branch? Online banking for other transactions, but for death claims, it is branch banking!” This reliance on manual processes and outdated systems slows down settlements and adds to the administrative burden.

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RBI’s proposed solution

The RBI’s proposal seeks to address these challenges by introducing a unified, nationwide protocol for handling claims across banks and branches. As Amey Pathak, Partner (head - banking) at Cyril Amarchand Mangaldas, explains, “The RBI’s proposal to standardise the settlement process for claims relating to deceased customers’ accounts, lockers, and safe custody articles should offer relief to customers… By moving toward a uniform framework, the RBI is focused on creating a standard system for ensuring a consistent and predictable process, regardless of the bank/institution that a customer is engaged with.”

The standardised process will focus on three key areas: regular bank accounts, items held under safe custody, and contents of safe deposit lockers. By establishing uniform documentation requirements, such as KYC and death certificates, the RBI aims to eliminate the need for nominees to navigate varying rules across institutions. Saurabh Sharma, Partner at Juris Corp, emphasises the urgency of this reform, stating, “This is a much-awaited move from RBI, given due to the lack of a standard process for settlement of accounts/lockers of deceased, survivors of deceased face lots of challenges in getting the money which duly belongs to them.”

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Benefits of standardisation

The proposed standardisation promises several benefits. Makhija highlights that this will simplify fund release procedures, reduce administrative burdens, and ensure faster processing. Pathak adds, “It will also streamline internal operations for banks, reduce the risk of disputes, and promote better governance around dormant and deceased-related assets.”

Alay Razvi, Managing Partner at Accord Juris, underscores the broader impact, noting, “This move seeks to reduce delays, ease the burden on bereaved families, and enhance trust in the financial system. It marks a meaningful step toward humanising banking regulation, especially at sensitive life junctures like bereavement.” Uniform procedures will also increase transparency, minimise disputes, and provide a predictable process for nominees across various financial platforms, including banks, demat accounts, and fixed deposits.

A broader trend

The RBI’s initiative aligns with similar efforts by other regulatory bodies, such as SEBI’s earlier move to standardise processes in the financial sector. Makhija notes, “SEBI made a similar move earlier in the year, indicating a broader trend towards standardisation in the financial sector.” This reflects a growing emphasis on consumer-centric reforms, including financial inclusion and grievance redressal.

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Looking ahead

By addressing documentation complexity, institutional variations, and procedural hurdles, the RBI’s proposal aims to make the claims process more transparent, efficient, and user-friendly. As Pathak aptly summarises, “Ultimately, this is a step toward making banking more responsive, transparent, and customer-friendly in moments that matter most.” For nominees and legal heirs, this reform promises a smoother path to accessing their rightful assets, offering relief during a difficult time.