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nism-series-xb-either-or-survivor-bank-account-legal-status[ INVESTMENT ADVISER (LEVEL 2) ]

Under RBI banking jurisprudence, what is the legal status of the surviving second holder in an 'Either or Survivor' bank deposit upon the death of the primary holder?

[ A ]The survivor becomes the absolute owner overriding all Wills.

[ B ]The bank deposit is confiscated by the government.

[ C ]The account is permanently frozen forever.

[ D ]The surviving holder is entitled to OPERATE and WITHDRAW the deposit from the bank to give valid discharge; however, beneficial ownership belongs to the lawful Legal Heirs entitled under the deceased's Will or Succession Act (the survivor holds funds as a trustee for legal heirs unless proven to be a gift).[ CORRECT ]

Takeaway

The correct answer is D: the surviving 'Either or Survivor' holder can operate and withdraw the deposit to give the bank a valid discharge, but beneficial ownership still belongs to the legal heirs entitled under the deceased's Will or succession law -- the survivor holds the funds as a trustee unless a genuine gift can be proven.

Derivation

'Either or Survivor' is a banking-operations mandate: it tells the bank whom to pay to close out the account cleanly after one holder's death, without needing probate or succession certificates for routine withdrawal. RBI circulars and case law are clear that this mandate governs only the bank's discharge of liability -- it does not, by itself, transfer beneficial ownership of the underlying funds to the survivor. Unless the survivor can independently establish that the funds were genuinely gifted to them (a separate and higher evidentiary bar), they must eventually account for the money to whoever the deceased's Will or applicable succession law designates as legal heir, mirroring the nominee-versus-legal-heir distinction tested elsewhere in this syllabus.

Why the others fail

A — The survivor becomes the absolute owner overriding all Wills.

Overstates the survivor's rights; survivorship enables bank withdrawal, it does not by itself confer absolute ownership overriding the deceased's Will.

B — The bank deposit is confiscated by the government.

Fabricated and false; there is no government confiscation of joint bank deposits upon a holder's death under RBI banking rules.

C — The account is permanently frozen forever.

False; the survivor can operate and withdraw the account -- funds are not permanently frozen, though beneficial title remains with the legal heirs.