Nomination in Bank Accounts

Nomination in bank accounts is a facility that allows the account holder to designate a person (nominee) who will receive the account proceeds in the event of the account holder’s death. The nominee is not necessarily the legal heir; they are the person authorised to receive the funds from the bank.

What Is Nomination?

Nomination is a simple administrative facility provided by banks and financial institutions. When the account holder dies:
– The nominee can claim the account balance by submitting the death certificate and their identity proof
– The bank releases funds to the nominee without requiring a succession certificate or probate

This makes it easier and faster for families to access funds immediately after a death.

Nomination vs Legal Inheritance

A nominee is a trustee, not an owner. The Supreme Court and various courts have held that the nominee receives the funds on behalf of the legal heirs. The actual legal ownership is determined by:
– The deceased’s will (if one exists)
– Personal law succession rules (if no will)

If the nominee and the legal heir are different people, the legal heirs can recover the funds from the nominee through legal proceedings.

Types of Accounts Where Nomination Is Available

– Savings accounts, current accounts, fixed deposits
– Demat accounts (shares, mutual fund units)
– Insurance policies (beneficiary designation)
– PPF, NSC, and other small savings schemes
– Safe deposit lockers

Making a Nomination

– Fill Form DA-1 (for new accounts) or Form DA-2 (to change nomination)
– Multiple nominees can be added with percentage shares for some instruments
– Minor nominees require a guardian to be named

Why Nomination Matters

Without nomination, the bank will require:
– Legal heir certificate or succession certificate
– No-objection from all heirs
– Indemnity bond in some cases

This can delay fund access by months.

Key Takeaways

– Nomination designates who receives account proceeds on death; simplifies and speeds up fund access
– Available for bank accounts, FDs, demat accounts, insurance, and small savings instruments
– The nominee receives funds as trustee; legal heirs retain the ultimate ownership rights
– Without nomination, heirs need legal certificates, causing significant delays
– Always keep nominations updated after marriage, divorce, or death of the original nominee