1. Before closing a customer's account due to "Undesirable Behavior", the bank is legally obligated to:
Forfeit the balance in the account.
Close the account immediately without notice.
Give "Reasonable Notice" to the customer to make alternative arrangements.
Obtain permission from RBI.
Explanation:
Based on the principle of natural justice and legal precedents (like Prosperity Ltd vs Lloyds Bank), a bank must provide reasonable notice to the customer before closing an account to allow them time to clear cheques and make alternate arrangements.
2. For settlement of claims in deceased depositor accounts without nomination/survivorship clause, the bank should generally insist on Succession Certificate only if:
The deceased was a minor.
The account is a current account.
The amount is very small.
The amount exceeds the threshold limit (policy) and there is a dispute among legal heirs.
Explanation:
RBI advises banks to settle claims simply on indemnity for small amounts. Legal representation (Succession Certificate) should be insisted upon only in cases of large amounts or disputes to avoid harassment of heirs.