Why Nominee Is Important For Your Bank Account?

Availing nomination facility is an important aspect of banking as it helps to ensure that the funds in the account are passed on to the intended person or persons without any hassles or legal complications, in case of the depositor’s death.

In the context of banking, nomination refers to the process of nominating a person or persons to receive the balance in a depositor’s account or the proceeds of a safe deposit locker, in case of the depositor’s death.

Why is nomination important in banks?

In the absence of a nominee, legal heirs may have to go through a lengthy and complicated legal process to claim the funds in the account. Nomination ensures that the funds are passed on to the nominee or through nominee to the legal heirs, without any legal hassles or disputes.

In case of the depositor’s death, the nominee can claim the funds as per the rules laid down by the bank. This saves time and effort for both the nominee and the legal heirs.

Nomination provides clarity about who should receive the funds in case of the depositor’s death.

Who is a nominee?

If a bank account holder passes away, the person or persons who will receive the proceeds are called a nominee or nominees, whom the account holder had nominated before his/her death.

The nominee is a beneficiary or the recipient of the assets, funds, and investments in a financial system, like a bank, insurance or property.

In banking context, a nominee is a person or entity who is appointed by an account holder to act on their behalf in case of their death or incapacitation.

Who can be a nominee for a bank account?

Nominee or nominees in a bank account means person or persons who the holder of the account trusts. It could be a member of his/her family, child, spouse, relative, and more.

If the nominee is not the legal heir, he or she will not be entitled to the funds. The nominee’s duty becomes to act as the trustee and transfer funds to the legal heirs.

What if there is no nominee added in the bank account?

When the account holder has passed away, and that person has not made any nomination, the legal heirs will have to go through the procedure of claiming the account’s funds.

Now let’s look at the processes of two leading banks in India and their nomination facilities.

Nomination Facility in SBI

• Nomination facility is available for all deposit accounts, articles in safe custody and safe deposit vaults.
• Nomination is available for accounts opened in individual capacity (i.e. single / joint accounts as well as accounts of a sole proprietary concern) only, i.e. not for accounts opened in representative capacity.
• Nomination can be done in favour of one person only. However, nomination in favour of more than one person (i.e. up to 2 persons) is permissible in jointly operated locker accounts with common consent.
• Nomination can be made, cancelled or varied by the account holder anytime during his/her lifetime. While making a nomination, cancellation or variation, a witness is required and the request should be signed by all account holders.
• Nomination can be made in favour of a minor also. During the period the minor does not attain majority, the natural guardian will receive the amount on the minors behalf.
• For the existing accounts where nomination is not made, the account holder/s can do so by filling up forms available with the branches.
• The right of a nominee to receive payment from the Bank arises only after the death of the depositor in a single account and death of all depositors in case of joint accounts.
• In case depositor(s) do(es) not wish to make nomination, the same should be recorded on the account opening form by the depositor(s) with their full signature.

Features of HDFC Bank nomination facility

• The nomination facility is available for accounts opened in individual capacity (i.e. single/joint accounts as well as accounts of a sole proprietary concern) only.
• This facility is not available for accounts opened in representative capacity such as the holder of an office like Director of a Company, Secretary of an Association, partner of a firm, Karta of an HUF and the like.
• The nomination can be made in favour of one person (being individual) only.
• The nomination can be made, cancelled or varied by the account holder anytime during his/her lifetime and request for the same should be signed by all account holders along with witnesses.
• The nomination can be made in favour of a minor also subject to other major individuals being named appointee(s) during the minority period.
• For the existing accounts where nomination is not made, the account holder/s can do so by filling up forms available with the branches.
• The right of a nominee to receive payment from the Bank arises only after the death of the depositor in a single account and death of all depositors in case of joint accounts.

In an unfortunate event of the death of a depositor, nomination enables the bank to:

• Make payment to the nominee of a deceased depositor, of the amount standing to the credit of the depositor
• Return to the nominee, the articles left by a deceased person in the bank’s safe custody
• Release to the nominee of the hirer, the contents of a safety locker, in the event of the death of the hirer.

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