INTRODUCTION:
Vertical and horizontal
growth of banks in India is a matter of pride not only for the bank employees
but also for any Indian, given the fact that the landscape of banking is
predominantly occupied by public sector banks facing systemic and non-systemic
issues. This success story simply put, while in 2011 only 58.70% of the
households have atleast one or more bank account/s, in 2016 this ratio is
increased to 99%.
While opening a bank
account, making nomination is very important aspect to avoid difficulty in
claiming the balance/articles in case of unfortunate death of the account
holder/all joint account holders. Though nomination facility is available for
various purposes, this write up is confined to bank accounts only considering
the audience and the medium. In case of joint account, appropriate operational
instructions can mitigate the hardship to some extent but still it is advisable
to make nomination in any of the accounts held jointly or singly. Considering
the importance of making nomination, Reserve Bank of India has instructed all
the banks to advise the depositors to avail the nomination facility and in
case, if the depositor is not willing to avail the facility, to record the
facts to this effect. Further, RBI has also instructed the Banks to put a
legend (indicative statement), in the passbook/ Statement of Account/Fixed /
Short Deposit Receipt, viz. “Nomination Registered” with the name of the
nominee if the depositor has given the consent to also add, in the legend, the
name of the nominee.
The procedure for making
nomination and settlement of claims by the nomination are governed by The
Banking Companies (Nomination) Rules 1985 together with Clause 45(ZA) to 45(ZF)
of Baking Regulations Act 1949.
It is ironic that though
the facility of nomination in bank deposit accounts/ locker facility is widely
used, it is also generally misunderstood. The depositors in general understand
that the nominee nominated by them will receive the balance amount (or
articles, in case of Safe Custody Facility or Safety Locker Facility) and
he/she will become the “sole owner” of the same. This perception is
incorrect. The nominee receives the same as a trustee and is
responsible to hand over the same to the heir/s of the nominator if he/she
(nominee) is not the sole heir of nominator/s or not the sole beneficiary of
the will left by the sole account holder. However, bank is
discharged from its liability once the payment is made in due course to the
duly nominated nominee. Nominee is required to produce his KYC Documents and
the Death Certificate of the Nominator. It is to be noted that the nomination
facility and settlement of claims under the facility is codified by RBI to
facilitate the timely release of the fund/articles belonging to the nominator
and it cannot override the Succession Law as applicable to the nominator/s.
WHAT IS A NOMINATION:
It is a codified
procedure of appointing the individual/s by an account holder / by a lesser
(hirer of locker) / by a bailer (safe custody of articles) for receiving the
balance amount/articles in the locker/articles bailed with the bank by the
person so appointed.
TYPES OF ACCOUNTS IN
WHICH NOMINATION FACILITY IS AVAILABLE:
All types of deposit
a/cs, Safe Custody Facility and Safety Locker Hire Facility
WHO CAN NOMINATE:
The individual/s who
has/have opened the account in the personal capacity can nominate a nominee.
Nomination facility
cannot be availed in accounts opened in fiduciary (representative) capacity
e.g. Body Corporate, Partnership Firm, Trust, HUF, Trust, Society,
Co-Op Society, etc.
Note: Sole Proprietor
can avail the facility of nomination in the account of the Sole Proprietor
Firm.
WHO CAN BE THE
NOMINEE:
Only an INDIVIDUAL can
be nominated as a nominee.
Note:
1. A minor can also be
nominated as nominee provided that the nominator has to appoint another person
who is not a minor to act on behalf of the minor.
2. Nominee may or may
not be a relative of the nominator.
3. An NRI can also be
nominated but the repatriation of fund will be subject to RBI norms.
HOW MANY INDIVIDUALS CAN
BE NOMINATED AS NOMINEE:
In deposit accounts,
only one individual can be nominated irrespective of the numbers of individuals
in joint account.
In Safety Locker Hire
Facility in the name two or more individuals where the operational instruction
is JOINTLY, the hirers can nominate one or more individuals as nominee.
OTHER IMPORTANT FEATURES
OF THE FACILITY:
1. Nomination can be made at
the time of opening the account or any time after opening the account.
2. In case of Joint
Account, irrespective of the operational instructions, nomination is to be made
by the joint signature of all the account holders.
3. Nomination is to be
witnessed by a person other than the nominee. If the nominator is illiterate
(authenticates the nomination form by putting thumb impression), it is to be
witnessed by two witnesses.
4. Nomination can be
canceled/ modified at any time by the nominator. In case of Joint A/c, all the
account holders have to sign for the purpose.
5. Prescribed forms are to
be used for respective purpose.
6. KYC Documents of the
witness are not required.
7. Where a single
individual is nominated as a nominee, the Nomination takes effect only
after, in the case of sole account holder, the death of the sole account holder
and in the case of joint account holders, death of all the joint a/c holders.
8. Nominee can give valid
discharge in respect of the claim lodged against the bank. Bank is discharged
once the nominee’s claim is settled. In case of dispute with the nominee, the
legal heir/s has/have no recourse against the bank. However, he/she/they can
proceed against the nominee. If the heir/s issue/s order from the court to bank
for preventing the bank from entertaining nominee’s claim, the bank has to act
as per the order of the court if the nominee’s claim is not settled before
receipt of the court order.
9. If there are more than
one heirs, nomination cannot prevent the other heir/s from claiming the share from
the nominee and hence, under such circumstances, nomination cannot serve the
purpose of a will if the nominator intends to make the nominee “the sole owner”
of the subject fund/articles merely on the strength of nomination. To repeat, nomination
can not prevent the heir/s from claiming
his/her rightful share from nominee. One’s wish to make an individual “the sole
owner” of the fund/articles with a bank, can be fulfilled by a valid will.
10. Give nominee’s correct
details (Name, Age, Relation (if any), Address etc) in the nomination form to
avoid any problem in future.
11. Bank has to prepare the
list of inventory of the articles before the nominee removes or in the case of
joint operations, nominee and the surviving hirer remove the articles. The list
of the inventory is to be signed by all the claimants.
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Disclaimer: This write
up is for general information only. Please refer to RBI/Bank website or consult
a legal expert before acting upon the information given in the write up. The
writer or his employer is not responsible for any liability which may result
from any action or omission of the person based on the information given hereinabove.
