When you are opening an account at a financial institution, generally speaking, you may be asked to select a nominated survivor. This simple selection can help to simplify the process for your loved ones after you are deceased; however, it does not affect how inheritance laws operate in India. This article will help to clarify how nominations work in India, their historical significance, how banks view nominations today, and what families can do to quickly claim amounts due from the nominations.
Overview
Below is a quick snapshot so you know what to expect in the sections that follow: practical rules, legal differences, RBI direction, how to add/change nominees, and claim steps.
| Topic | Snapshot |
|---|
| What a nominee is | A person designated to receive funds from your bank account after your death acts as a custodian/trustee until legal heirs take final ownership. |
| Key legal point | Nominee ≠ owner; legal heirs obtain ownership under succession law or a valid Will (Supreme Court clarifications). |
| RBI direction (2025) | RBI has urged banks/NBFCs to ensure all deposit accounts and lockers have nomination details to ease claim settlement. |
| Practical benefit | Faster payouts, less paperwork, and help prevent funds from becoming unclaimed (a large unclaimed pool exists). |
Also Read: Are Legal Heirs Responsible For Paying The Deceased’s Tax Dues?
What Is A Nominee In A Bank Account?
A nominee(s) in an account is the person(s)/entity(ies) that you designate to receive the balance of your account or deposit proceeds as quickly as possible upon your death. Nominee(s) are responsible for acting as custodians of the funds or acting on behalf of the legal heirs of the deceased account holders and receiving funds from the financial institution to hold for the legal heirs until the legal heirs have claimed them. Nominations expedite access to funds and provide relief for dependents of deceased individuals, but do not alter who owns the accounts or determine how the laws of inheritance will determine who receives the accounts of deceased individuals.
Why Nomination Matters Now?
The recent focus on nominee applications goes beyond just helping families manage their estates; it's also providing a much-needed boost to India's economy through the recovery of long-dormant accounts. By March 2024, there was an estimated ₹78,000 crore of unclaimed deposits in Indian banks, with many of those accounts still not having current nomination details or active heirs available. When a person has a valid nomination and up-to-date KYC on file with the bank, there is less chance of delays in retrieving the funds if anything happens to the account holder. Recent enhancements in the portal systems established by the Reserve Bank of India and government agencies (such as UDGAM—the Unclaimed Deposits Gateway) will also help facilitate the discovery and return of unclaimed funds.
Who Can Be A Nominee?
There are several categories of individuals who are allowed to be named as nominees, and there are some key practical considerations to know regarding each category of nominee and the way various banks will treat those designations:
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Any adult individual (spouse, child, parent, relative or friend) can be named as a nominee.
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Minors may also be named as nominees. If you choose to name a minor, the bank will either pay the proceeds directly to a designated guardian or establish a separate account for holding the proceeds until the minor reaches age 18.
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Nominees who live outside of India (non-resident Indians or NRIs) may be named, but some banks may require special clearance from the Reserve Bank of India or their own institution-specific requirements before permitting the transfer of funds abroad.
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Certain banking products also allow corporations or trusts to act as nominees; however, there may be limitations placed on this by the specific institution mailing the specific instrument you are considering.
Nominee VS Legal Heir
Understanding this distinction prevents future disputes. Below is a short comparison showing what each status means in practice and law.
| Feature | Nominee | Legal Heir |
|---|
| Role | Custodian/trustee who receives payment from the bank. | Owner(s) by operation of succession law or a Will. |
| Does nomination create ownership? | No — it facilitates transfer/receipt. | Yes — heirs get ownership through succession or valid testamentary documents. |
| Do banks require additional legal documents? | Banks may pay the nominee after minimal verification, but expect legal heirs to present the succession/will for final distribution. | Heirs typically submit a succession certificate/probate or a will for ownership transfer. |
| Can a nomination be overruled? | For practical bank disburs, it helps; however, legal heirs’ rights prevail in final distribution under the law. | |
Also Read: Understanding Gratuity Forfeiture: Legal Boundaries and Employee Rights
How Does Nomination Work?
The process for nominating a nominee on banking products (e.g., checking, savings accounts, bank deposits, bank lockers, financial instruments) generally works as follows:
1) At the Opening of an Account -
At the time you open your account, ask your bank for a nomination option. Write down the nominee's name, relationship, address and if the nominee is a minor, the name of the minor's guardian. Your bank will record this information in your account file.
2) Adding/Changing the Nominee -
If you wish to add/change your nominee at a later date, go to your bank branch and request to change your nomination. Also, if you have access to the internet, you can do this via net banking or using your bank's mobile app, depending on your bank. Bring your government-issued ID and the completed nomination/change form to your bank branch.
3) Minor Nominees -
If you have named a minor as your nominee, you will also need to provide proof of guardianship and verification of the minor's age. Your bank will pay the funds to the guardian upon your death, or deposit the funds into a “minor’s account” until the minor reaches the age of majority.
4) Lockers and Other Safe Deposit Boxes -
Your bank allows you to name a nominee for a locker or safe deposit box. However, you need to verify your bank's procedures before naming a nominee.
How A Nominee Claims Money After The Depositor Dies?
If you have been named as the nominee, the process is fairly straightforward. Please make sure you have gathered the necessary documents to expedite the process.
1. Bank Notification:
You should notify your bank immediately of the depositor's death and provide them with a certified copy of the death certificate.
2. ID Verification and Relationship Proof for Nominees:
You will need to provide your Aadhaar Number, PAN Number, or passport (as appropriate) to verify your ID and to prove your relationship to the deceased.
3. Verification by Bank:
The bank will verify the nomination record and may require a sworn statement from you and/or verification of your signature.
4. Payment to Nominees:
The bank generally makes payments directly to the nominee in cases of small sums, but in the case of larger sums, may require the nominee to provide an indemnity and/or other legal documentation (or may issue a cheque to the legal heirs pending completion of the necessary legal documentation). Final ownership of the funds, however, will pass to the legal heirs of the depositor pursuant to succession law
What If There Is No Nominee?
When there is no nominee, the process of claiming funds from a bank will take longer than when there is a nominee. A lot of time can be spent attempting to establish who the rightful claimants to the funds are. Generally, banks require a succession certificate, a legal heir certificate, or a court order to settle the claim. Due to the level of hardship caused by these circumstances, the Reserve Bank of India (RBI) has encouraged banks to promote nominations to minimise the difficulties faced by families in these situations. This is one of the reasons there are large amounts of unclaimed deposits held by banks, despite government attempts to address this issue.
Conclusion
A nominee makes life simpler for survivors by enabling quicker bank payouts and easing initial financial stress after death. However, nominees are custodians — not a substitute for inheritance law or a Will. Recent RBI guidance makes it clearer that nomination is essential and banks should ensure nominations are in place for all deposit accounts and safe custody items. For complete certainty about how you want your assets distributed, pair nomination with a properly executed Will and keep all KYC details current. Doing so protects your family, speeds up claims, and reduces the growing pool of unclaimed funds in the system.
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