In today’s digital era, opening a bank account online has become quick, convenient, and hassle free. However, when it comes to financial matters, there are specific eligibility criteria and legal considerations to remember.
So, let’s clarify whether an undischarged insolvent individual can open a bank account in India and provide insights into the eligibility criteria and required documentation.
What is insolvency?
An insolvent person is an individual who cannot repay their debts or whose liabilities exceed their assets. Insolvency proceedings can be initiated against such individuals, and creditors may file insolvency petitions in certain situations. When an insolvency petition is filed against a bank customer, the bank must immediately cease payment of cheques drawn by the customer, regardless of their date. If the customer is adjudicated insolvent by the court, the bank’s relationship with the insolvent customer is terminated.
Termination of the banking relationship
Once an insolvency petition has been filed against a bank customer, the bank is obligated to take immediate action. Regardless of whether the customer’s cheques were dated before or after the petition, the bank must cease honouring any cheques issued by the customer. This action is taken to safeguard the concerns of the creditors who are a part of the insolvency case.
Vesting of assets with court receiver/official assignee
When an individual is adjudicated insolvent by the court, the relationship between the bank and the insolvent customer is terminated. At this point, all the assets belonging to the insolvent person are transferred to a court receiver or official assignee appointed by the court.
The role of the court receiver/official assignee is to administer and distribute the assets among the creditors in accordance with the procedures outlined in the relevant law.
Can an undischarged insolvent open a new bank account?
Usually, an undischarged insolvent cannot open a bank account during the moratorium period. This is to prevent the individual from conducting financial transactions that could hinder the insolvency proceedings and harm the interests of the creditors.
It’s important to note that the restrictions placed on the undischarged insolvent may be specific and related to the individual circumstances, the stage of insolvency proceedings, and the orders of the court.
Once, the individual is discharged from insolvency, they are typically free to open a new bank account. And opening a bank account online today has become a convenient and streamlined process, allowing individuals to manage their finances efficiently.
Online saving account opening
To open a bank account online, eligible individuals must visit the bank’s official website or use the bank’s mobile application. They can choose the type of account they wish to open, such as a savings account. The online application will require the individual to fill in personal details, upload necessary documents, and complete the Know Your Customer (KYC) process.
Documents required for bank account
The documents needed to open a bank account in India include proof of identity (such as an Aadhaar card, PAN card, passport, or voter ID), proof of address (such as an Aadhaar card, utility bills, or rent agreement), and recent passport-sized photographs. To ensure that you have all the necessary requirements and documentation, it is important to contact your bank directly for any updates or changes.
To wrap up
Since the restrictions placed on the insolvent individual are based on their specific case, it’s best to seek legal advice regarding opening a bank account and other financial matters. This will ensure that the individual is not breaching any laws and can figure out a way to manage their finances effectively.