As per the recent Banking Laws Amendment Bill passed in both the houses, an individual can appoint up to 4 nominees for their bank accounts or fixed deposits. This is a remarkable change from the previous single nominee system. The earlier rule created problems in efficient transfer of assets, in the event of nominee pre-deceasing the account holder. The absence of a secondary nominee caused legal delays and the funds from inoperative accounts or unclaimed matured deposits would be transferred to Depositor Education and Awareness fund maintained by the RBI.
As per the new rules, a bank account holder will have the option to choose between 2 types of nominations – simultaneous and successive.
Simultaneous nomination allows account holders to appoint multiple nominees to share the account proceeds in a specified ratio in the event of their death. For e.g. Mr.A had Rs.15 lakh in his savings account and nominated his wife, son and daughter as simultaneous nominees. He wished to share the bank account proceeds in a 50:25:25 ratio upon his passing. His wife would thus receive Rs.7.5 lakh and both his children would each receive Rs.3.75 lakh. If a nominee dies, his or her share will be re-distributed according to the applicable ratios.
Successive nomination ensures that the assets pass to the next nominee if the primary nominee is deceased. For e.g., Mr.B appoints three nominees, his wife, son and daughter. If Mr.A passes away, the wife inherits 100 per cent of the bank proceeds. If the wife is not alive, the son inherits. If both are deceased, the daughter inherits.
The new nomination rule thus offers account holders the flexibility to appoint multiple nominees and secure the efficient transfer of assets to loved ones without any hassle.
This is also likely to reduce the possibility of matured deposits and saving balance of dormant accounts going unclaimed in banks.
Nomination, however, is just the first step of wealth protection journey in an individual’s life. A nominee is not the ultimate beneficiary but only a custodian enabling a seamless transfer of assets. Depositors should hence ensure that their nominations are aligned with the beneficiaries of their Will, facilitating a smooth transfer.