Coverage of customers under the nomination facility

 Nomination facility in bank is governed by various acts like Insurance etc. Nominees are appointed as trusty of assets and rights of legal heirs on the assets are not at all affected by nomination. A nominee can be relative, a known person or even a friend also. Banks are always insisting for nomination in various types of deposit accounts, locker accounts, D-mat accounts and even in internet banking facilities to eliminate complications that may arise after the sad demise of constituents.

Nominations must be necessarily made by depositors/clients of the banks and the power of attorney holder has no right to appoint nominee. Also, minors cannot be a nominee without guardian. From time to time, the Government is making amendments in nomination rules to facilitate the customers. For Banks these amendments implemented through RBI.

As per the new bill passed on 3.12.2024, customers can appoint as many as nominees, and they can be nominated simultaneously or successively. The coverage of nominations in accounts is not at all up to the mark as per Govt/ RBI findings for which RBI has taken various steps like educating frontline staff who will sensitize customers for appointing nominees. 

Although nomination facility is supervised by RBI (As RBI is central Bank of India) the nomination facility is defined and governed by various acts in acted by parliament from time to time. These acts are as follows:

1. The Banking Regulations Act,1949
2. Banking Companies (nomination rules) 1985
3. Insurance Act,1938

The Banking Regulations Act allows banks to pay deceased depositors money to the Nominee. This act also allows to release contents of lockers. Banking Laws Amendment Act, 2024 allows four people as nominee but with the condition that specific percentage of the deposit must be allocated to each nominee. It is the responsibility of the nominee that each legal heir receives his share of the assets. Different institutions have formed their own rules for nomination to suit their clients. For example, SEBI has allowed as many as ten nominees for mutual fund and D-mat accounts.

In terms of coverage the nomination facility applies to Bank Accounts, Life Insurance Policies, Post Office Schemes, Mutual funds, Retirement Accounts etc. A Customer can nominate one or more individuals to receive the balance of their account upon their death. This can apply to both savings accounts and fixed deposits. In case of policyholder’s death, the nominee will receive the insurance payout, ensuring that the proceeds go directly to the designated person without the need of probate or other legal process. Like banks and insurance policies, post office saving accounts and other investment schemes can also have a nominee, allowing the funds to be transferred seamlessly upon the customer’s death. Investors can designate a nominee to ensure that, in the event of their demise, the mutual fund units are transferred to the nominees. In the nutshell it can be stated and conclude that various acts and rules are introduced to encourage more and more nominations so that hardships to claim assets of deceased are minimized to larger extent.