Banking · Right of Set-off
Mrs. Gupta and her daughter, Anjali, maintain a joint savings account with 'Either or Survivor' instructions. Mrs. Gupta also has a substantial fixed deposit in her single name, where Anjali is the nominee. Mrs. Gupta passes away in June 2025, leaving an outstanding personal loan of 5 lakh rupees with the same bank. Anjali approaches the bank to withdraw the joint account balance and claim the fixed deposit. The bank intends to exercise its 'Right of Set-off' to recover the loan from both accounts. Evaluate the bank's legal position.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank can set off the loan from both accounts, but only after obtaining a 'Succession Certificate' from the court to prove Mrs. Gupta's total liability.
- 2The bank cannot set off the loan from either account because the death of the borrower terminates the bank's right to set off funds against the heirs or survivors.
- 3The bank can set off the loan only from the fixed deposit because it was in Mrs. Gupta's single name, but it cannot touch the joint account because of the 'Either or Survivor' clause.✓
- 4The bank can set off the loan from both the joint account and the fixed deposit because the 'Right of Set-off' overrides the rights of survivors and nominees.
Correct answer
The bank can set off the loan only from the fixed deposit because it was in Mrs. Gupta's single name, but it cannot touch the joint account because of the 'Either or Survivor' clause.
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