Uncertainty often surrounds financial liabilities after the death of a borrower, especially in cases involving credit cards and personal loans. Many families worry whether banks can demand repayment from them or seize assets left behind by the deceased.
If a credit card holder or borrower passes away, the family members are not personally liable to repay the outstanding amount from their own income. According to rules laid down by the Reserve Bank of India and India’s succession laws, banks cannot force spouses, children, or parents to settle dues from their personal funds. Any such pressure by recovery agents is a clear violation of norms.
The key concept here is the “estate” of the deceased. The estate includes all assets left behind, such as bank balances, fixed deposits, land, property, shares, and jewellery kept in bank lockers. If there are unpaid credit card bills or loans, the bank has the legal right to recover its dues only from this estate.
However, recovery is limited to the value of the assets. For example, if the outstanding amount is ₹5 lakh but the estate is worth only ₹2 lakh, the bank can recover only ₹2 lakh. The remaining ₹3 lakh must be written off. If legal heirs wish to claim any property from the estate, the debts must be cleared first.
Banks also have what is known as the “right of set-off.” If the deceased held a savings account or fixed deposit with the same bank, the bank can adjust the outstanding credit card dues against those funds without seeking separate consent. In the case of lockers, jewellery will not be released until the dues are cleared, as the bank can legally place a lien on those assets.
Legal heirs should also note that a nominee is only a trustee, not the owner of the funds. Even if an account has a nominee, the bank can still use the balance to recover dues. While credit cards and personal loans are unsecured, secured loans like home or car loans allow banks to take possession of the house or vehicle.
The RBI has clearly instructed banks to act with sensitivity. Recovery agents cannot harass or threaten grieving families. If this happens, a complaint can be made to the Banking Ombudsman.
Families are advised to inform the bank immediately with a death certificate, check for any credit insurance linked to the loan or card, and explore a one-time settlement if needed. The law is clear: the debt survives, but only against the estate, not the family.
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