Banks should not demand ‘Legal Guardianship Certificates’ as routine

RBI Clarification on Requirement of Legal Guardianship Certificates by Banks under “Mental Health Act, 1987”

RBI had issued Circular DBOD.No.Leg.BC.84/09.07.005/2013-14 dt 13 Jan., 2014 wherein banks were advised to take note of the legal provisions in the Mental Health Act, 1987 and to rely on the orders/ certificates issued by the competent authority, under the Act, appointing guardians/ managers for the purposes of opening / operating bank accounts of the individuals concerned.

Subsequently RBI noticed that banks are insisting on guardianship certificate from all mentally ill persons and hence RBI has reviewed the matter and has clarified that aforesaid circular is not intended to mandate banks to insist on appointment of a guardian as a matter of routine from every person “who is in need of treatment by reason of any mental disorder”.

Therefore, it would be necessary for banks to seek appointment of a guardian only in such cases where they are convinced on their own or based on documentary evidence available, that the concerned person is mentally ill and is not able to enter into a valid and legally binding contract.

In nutshell, we can say that as per RBI Clarification, now the Banks may seek appointment of a guardian only in such cases where they are convinced on their own or based on documentary evidence available, that the concerned person is mentally ill and is not able to enter into a valid and legally binding contract.

RBI Notification dt. 11 Feb 2016

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