Bank Account Holders Can Now Appoint Up to Four Nominees; What Does the New Rule Mean?

One key change in the banking regulations now permits account holders to choose up to four nominees in place of one. This amendment comes after the Banking Laws (Amendment) Bill has been passed in the Rajya Sabha and aims at giving greater flexibility in the management of financial assets and in the minimization of unclaimed deposits in the banking system.

Key Changes in Nomination Rules

Before this change, it was possible for a single nominee to be nominated in an account, which, most of the time, resulted in fund complications while distributing them. Now that there is this change, four nominees can now be nominated for an account so that funds will go to whom they want them to.

For a smoother transfer, this amendment presents two methods of nominations: simultaneous and successive.

Knowing the Two Nomination Forms

Simultaneous Nomination

This facility enables account holders to distribute definite percentages of their deposits between several nominees. For example, if an account contains Rs.10 lakh, and three nominees are designated under a 40:30:30 distribution, the money will be distributed as follows Rs.4 lakh to the first nominee and Rs.3 lakh to each of the others.

Successive Nomination

Here, a sequence is created under which the transfer of funds is prioritised. If the first nominee cannot accept the funds, then the next takes over. For instance, if A is the first nominee but cannot be reached, the funds are passed on to B. If B is not available, then the proceeds will go to C. This method is used to avoid interruptions in transferring funds, particularly when a nominee dies before they can access the assets.

New Rules for Bank Lockers

The amendment also modernizes the nomination procedure in the case of bank lockers. However, while both nomination procedures are permissible in the case of deposit accounts, successive nomination alone is acceptable in the case of lockers.

Impact of the Amendment

The shift is likely to curb unclaimed deposits, which have increased by 26% from Rs. 62,225 crore in March 2023 to Rs. 78,213 crore in March 2024, as per RBI data. The new rule facilitates families with smoother access to funds without legal impediments and lightens the administrative load on banks by providing clarity on nominee rights and decreasing conflicts.

By providing greater control over financial assets, this amendment simplifies wealth distribution and enhances account holders’ and their families’ financial security.