Read on to learn about the various ways you can make nominations for your bank account and lockers, and where unclaimed bank deposits and bond investments can be retrieved from.
Decide on the kind of nomination you want to make
Previously, Section 45ZA of the Banking and Regulation Act, 1949, provided for only 1 nominee to receive depositor’s money. Now, account holders can add a maximum of 4 nominees to their bank account. This can be done either successively or simultaneously. So, let us first understand the difference between these two different ways of nominationsIn a simultaneous nomination, all the appointed nominees will receive money in a proportion pre-specified by the account holder. Say the a/c holder appoints 4 people as nominees, and mandates that they will get 40%, 30%, 20% & 10% respectively.
Upon the depositor’s demise, they receive their respective shares immediately, without any ambiguity or contesting for their share.
According to the law, “the nomination shall explicitly state the proportion of the amount of deposit in percentage in favour of each nominee, and shall be made in respect of the whole amount of deposit”.
But what happens if the appointed nominee dies before the account holder? In such a case, “the nomination in respect of such nominee alone shall become ineffective and the amount of deposit purported to be nominated in favour of the deceased nominee shall be treated as if the nomination had not been made in respect of that portion of the deposit”.
Generally, in cases where no nominee has been appointed, the bank will seek clarity by way of documents such as a registered will, succession certificate, etc, so that money can be transferred to the depositor’s legal heir. However, this can be a time-consuming process. On the other hand, a successive nomination takes on a hierarchical approach, wherein the first nominee is solely entitled to the account holder’s deposit after their demise. All the subsequent nominees in line only becomes eligible if this first nominee passes away before the depositor, or denies the claim. In this case, where the order of nomination has not been explicitly mentioned, the persons shall be deemed to have been nominated in the order in which their names appear in the nomination.
Explains Rajiv Sharma, Partner, Singhania & Co.,” To avoid conflicting claims and legal ambiguity, the legislation requires that an account holder choose between simultaneous and successive nominations in the same account. Allowing both processes could result in conflicts where successive candidates claim priority rights and simultaneous nominees choose proportionate shares, which would leave asset distribution uncertain.”
However, some experts, like Shri Venkatesh, Founding Partner, SKV Law Office, note that an individual can also make both simultaneous and successive nominations for different portions of their deposit, so that a clear plan, in terms of order and proportion, is set out for legal heirs.
“This flexibility allows depositors to customize their asset distribution while ensuring a clear and structured succession plan. For example, a depositor can allocate a percentage of the deposit to multiple nominees simultaneously while also specifying a successive nominee who would inherit a portion of the funds if a primary nominee is unable to claim them. The framework is designed to prevent confusion by clearly defining the order of inheritance and the proportion of distribution”, he adds.
Which is better-simultaneous or successive nomination?
Says Sharma, “Legally, simultaneous nominations prevent disputes by ensuring clarity in asset distribution, whereas successive nominations establish an orderly succession, reducing competing claims and legal uncertainty.”
Venkatesh opines that simultaneous nominations allow for a more efficient and proportional distribution of assets. “Successive nomination, on the other hand, follows a priority-based approach where only one nominee at a time is eligible to inherit the deposit. If the first nominee in the sequence is unable to claim the funds, the next nominee in line becomes eligible, and so forth. This ensures a clear succession plan, preventing potential conflicts or delays in asset distribution”, he adds.
Only a successive nomination for bank lockers, items in custody
Depositors cannot make simultaneous nominations for their rented bank lockers or any other items held in bank custody. Only successive nominations are allowed in this respect. Account holders can designate up to 4 nominees successively, with the highest-ranked nominee taking priority in case of the account holder’s death. This ensures a structured and dispute-free transfer of ownership, preserving the integrity of these valuable assets.
As per law, “where one or more individuals hire a locker from a banking company, whether such locker is located in the safe deposit vault of such banking company or elsewhere, the individual or, as the case may be, all the individuals together, may nominate one or more persons not exceeding four, successively, to whom, in the event of the death of the sole hirer or the death of all the hirers, the banking company may give access to the locker and liberty to remove the contents of the locker.”
Forgotten bank deposits, bond investments? Where to retrieve them from?
Previously, as Venkatesh highlights, banks were required to transfer unclaimed amounts that remained inactive for ten years to the IEPF (Investor Education and Protection Fund). But starting 2022, all such funds are transferred to RBIs DEA (Depositer Education Awareness) funds. Deposit holders can retrieve this amount from their respective banks at any point in time.
However, if you have had investments in bonds which have stayed unclaimed for over 7 years, such unclaimed bond redemption amount and the accrued interest will be transferred to the Investor Education and Protection Fund (IEPF), as per the new rules.
Also, any money which remains unpaid or unclaimed for a period of seven years from the date of its transfer in the Unpaid Dividend Account of the banks will be transferred to the IEPF.
“This prevents indefinite retention of such funds by banks and centralises them for better oversight”, explains Soayib Qureshi, Partner, PSL Advocates & Solicitors.
