The Reserve Bank of India has released a notification stating that nomination options are not available for a significant number of deposit accounts held with banks and NBFCs. In order to prevent unnecessary difficulties for the survivors or family members of deceased depositors, the RBI has directed banks to ensure that nomination details are obtained for all current and new customers with fixed deposit accounts, savings accounts, and safety lockers.
The inclusion of a nomination will streamline the process of transferring funds from savings accounts, fixed deposits, or safe deposit lockers to the designated beneficiary (nominee) without any delays or legal complications.
The nomination facility has been crafted to reduce the burden and expedite the settlement of claims by family members in the event of the depositor or depositors' passing. The RBI, in a circular on January 17, stated: “Instructions on nomination facility for Scheduled Commercial Banks (SCBs) (Excluding RRBs), Primary (Urban) Co-operative Banks (UCBs) and Deposit taking NBFCs have been incorporated in Master Circular on “Customer Service in Banks”1, Master Circular on “Customer Service – UCBs”2 and Master Direction on “Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016”3, respectively. The extant instructions also mandate banks to give wide publicity and provide guidance to deposit account holders on the benefits of the nomination facility.”
Nominee and nomination
In the context of an account or investment, a nominee is the designated recipient chosen by the account holder to inherit the funds in the event of the account holder's passing. Providing the nominee's name at the time of account opening or subsequently updating it guarantees a seamless transfer of the account holder's assets to the nominated individual.
To prevent potential legal complications, it is advisable for families to designate a nominee for their investments and assets. As stated on the Bandhan Bank website, having a nominee is crucial as it allows for a seamless transfer of investments to the designated individual in the unfortunate event of the investor's demise.
Failure to assign a nominee can result in a prolonged and cumbersome process for the family or legal heirs to claim the deceased person's assets. This can lead to delays, additional paperwork requirements, and added stress for the individuals involved.
By simply nominating a beneficiary, the claim process can be expedited by providing address proof, bank details, and identification during the claim procedure. This not only streamlines the transfer process but also ensures a smooth transition of investments to the rightful nominee.
Nomination in accounts
According to the most recent notification from the RBI, the Customer Service Committee (CSC) or the Board of Directors will conduct regular reviews of nomination coverage status. Progress reports are to be submitted quarterly through the DAKSH portal, beginning March 31, 2025. The RBI circular emphasizes the importance of training branch staff to effectively manage nomination requests and claims from deceased customers. It also instructs that Account Opening Forms should be revised to provide customers with the option to nominate a person or to opt out of the nomination process.
It is recommended that banks utilize different media channels to inform customers about the nomination facility, in addition to directly notifying them. The RBI suggested organizing periodic drives to ensure all eligible accounts are covered with nominations.