All about nomination in a bank account

Kanwarlal, a successful diamond merchant died recently leaving behind his wife Nisha and twin daughters aged 10 years. His wife, a homemaker had no clue either about her husband’s business or his investments. With great difficulty, she was able to trace the details of his Bank accounts and deposits. Nisha did not face major problems in respect of deposits where Kanwarlal had made nominations, as the formalities were simple and easy to comply with. However, Kanwarlal had unintentionally not nominated anyone in his primary Bank account, where he did most of his transactions.

Nisha’ s ordeal to claim the money lying in her husband’s deposit accounts started when the bank official told her to submit a litany of documents. Only if Kanwarlal had nominated someone, Nisha did not have to run from pillar to post to get the many documents and certificates that the bank demanded settlement of her husband’s claims.

The above case highlights the importance of nomination in investments and why all of us must willy-nilly make nomination whether it is a PPF, Life Insurance policy, Mutual Funds or Bank deposits.

What is nomination?

Nomination is a facility that enables an account holder to appoint an individual, who can claim the proceeds of the deposit account after the death of the depositor. The benefit of nomination is that in the event of the death of an account holder, the Bank can pay the amount lying in the account of the deceased to the nominee without insisting for a Succession Certificate, Letter of Administration or Court Order. Though nomination is optional for bank customers and the facility is available on a voluntary basis, it would be wise if you nominate a person in all your investments to avoid unpleasant situations like the ones that Nisha faced when her husband died.

Nomination facility is an ideal way to minimize the hardships of the legal heirs in settlement of claims expeditiously in the event of the death of the account holder.

Is Nomination mandatory?

No. Nevertheless, if you do not want to do nomination in your account you have to indicate that you do not wish to nominate any person. It is advisable to nominate a person as it simplifies the procedure for the settlement of claims. A nominee is only a trustee of your assets and he does not take away the right of your legal heirs on your financial assets.

Who can nominate?

All account holders having deposit accounts –- savings bank or term deposits in their individual names or in joint names can appoint a nominee to their accounts. A sole proprietor can appoint a nominee to the sole proprietorship account with the bank. In case of deposit accounts in the name of a minor, nomination can be made by a person lawfully entitled to act on his behalf.

There cannot be more than one nominee in respect of a single/ joint deposit account. Do remember that you can nominate only one person in respect of bank accounts, unlike Mutual Funds or PPF where you can have more than one nominee. However, you have the option of nominating different persons for different accounts. To clarify, if you have multiple accounts like a SB account, a recurring deposit and fixed deposit in the same bank branch, you can nominate different persons for each of them. Nomination in favor of more than one person is permissible in a jointly operated safe deposit locker account with the mutual consent of all account holders. The good part of nomination is also that the person you are nominating need not be related to you. You can nominate anyone -- your relative, an acquaintance or even a friend.

When should you nominate?

You can register for nomination either at the time of opening of the account or subsequently at any time. There are certain specific nomination forms that you need to complete and submit to the Bank for registering the nomination facility. Different forms are applicable to register nominations on deposit accounts and safe deposit lockers. Once you submit the form, the bank will acknowledge receipt of the nomination form.

Cancel or change

Cancellation or variation in the nomination can be made at any time as long as the account is in force. Bear in mind that making nomination, cancellation or variation, the applicable rules need to be followed. Moreover, if the account is held in more than one name, all account holders need to sign on all the requisite forms. While form DA1 is to be used for a fresh nomination, DA2 and DA3 are for cancellation and modification. These forms can also be downloaded from your Bank’s website.

(The writer is a former banker and Chartered Financial Analyst and currently teaches at
Manipal Academy of Banking, Bengaluru)