Giving great relief to applicants for a depositor of the Seniors Savings Program (SCSS), the Association of Indian Banks (IBA) has asked its member banks not to impose a penalty for withdrawing from the program by a candidate or legal heir after death. of the account holder.
In a circular, IBA says it has come across complaints that some banks, while dealing with settlements or premature payments of accounts to legal heirs or agents of the deceased depositor under the SCSS, are treating it as a premature withdrawal. and the criminal interest levy.
“… we ask all member banks to be guided by the SCSS rules to avoid any complaints. Additionally, we suggest member banks design a mechanism to capture the closure or premature reason in their system or solution. Basic Banking (CBS) for transparent processing of such requests received from customers, ”said the Association of Banks and Other Banking Industry Entities in India.
Pursuant to the July 28, 2010 amendment to Rule 8, subsection (3) of the SCSS Rules, “In the event of the death of a depositor prior to maturity, the account will be closed and the deposit refunded on a demand form. ‘F’ as well as the interest applicable to the regime up to the date on which the depositor has expired, to the representative or to the legal heirs in the event that the representative has also expired or if the designation provided for in Rule 6 has not been made, as the case may be. period between the day following the date of the depositor’s death and the date on which the repayment is made, simple interest is paid at the rate applicable from time to time to savings accounts in accordance with Article 6 of the Accounts Regulations postal savings plan, 1981. “
Further, according to the IBA, Rule 8, sub-rule (5) clearly states: “No deduction, as specified in Rule 9, will be made in the event of premature closure of an account at any time due to the death of a depositor. “
However, many banks continue to view withdrawals from the SCSS account after the depositor’s death as a premature closure and deduct 1% to 1.5% of the deposit as a penalty as defined in Rule 9 of the SCSS Rules. In accordance with the rule, the depositor may be allowed to withdraw the deposit and close the account at any time after the expiration of one year from the date of opening the account with certain conditions.
Depending on the conditions, if the SCSS account is closed between one and two years from the date of its opening, banks can deduct 1.5% of the deposit and refund the balance. If the account is closed after two years, banks can deduct 1% from the deposit.
As the name suggests, SCSS is a popular investment option among those aged 60 and over. However, many depositors complain that they do not receive the interest rate stipulated in the scheme.
According to an elderly person, the software of some banks pays interest at the rate in effect when the renewal application is made. “In fact, it should be the rate at the maturity date of the SCSS,” he says.
In addition, he believes, the banking software installed in many banks may not have a customer number or customer identification (CID) concept for SCSS. “Thus, whenever an additional deposit is made, we are required to provide all documentation, including photos.”
The SCSS, which offers guaranteed quarterly interest payments, was introduced in 2004 with the aim of providing seniors with a stable and secure source of income for their post-retirement period.
This account can be opened at any bank or post office and has a term of five years and can be extended for a further period of three years (the request must be made by completing form B within one year after maturity). Thus, effectively, this Plan is limited to five years. Only a single extension up to three years is possible; therefore, one cannot invest in this plan beyond eight years.
A maximum of Rs15 lakh can be invested (individually or jointly in the program). You can only open a joint account with your spouse.
The interest rate offered under the SCSS is revised quarterly by the Ministry of Finance and its calculation depends on several factors such as prevailing market rates and the level of inflation.
Currently, the interest rate on SCSS is 7.4% per annum, payable quarterly. For this scheme, tax benefits are available under Section 80C of the Income Tax Act. However, interest earned under the SCSS is fully taxable and should be added as “income from other sources”.