Bank nomination rules amended to align with will, avoid disputes

For deposits, nominee shares should mirror the division in the will; for lockers, the order should match the will

Beginning November 1, bank customers will be able to name up to four nominees for their accounts and lockers as key provisions of the Banking Laws (Amendment) Act, 2025, take effect. Experts explain how bank customers should structure their nominations depending on their family situation, and ensure they are aligned with their will.

 

What has changed 

At present, banks allow only one nominee for savings accounts and deposits, regardless of the mode of operation.

 

“For safe deposit lockers, one nominee is allowed if it is operated solely, and more than one if jointly operated with the signatures of both,” says Rajat Dutta, founder and initiator, Inheritance Needs Services.

 

From November 1, according to the new law, customers can appoint up to four nominees for deposits — either successively or simultaneously. For lockers, up to four nominees can be named, but only successively.

 

Successive vs simultaneous nomination 

The new framework allows two options: simultaneous and successive nomination.

 

In successive nomination, the claim passes to the next person in the priority list, ensuring a clear line of succession.

 

“From an estate-planning perspective, this ensures a straightforward transfer of an asset to a primary beneficiary, with fallbacks in place in case of the primary’s demise,” says Keshav Singhania, head – private client, Singhania & Co.

 

Under simultaneous nomination, depositors must specify each nominee’s share. “The individual share of the nominee(s) needs to be stipulated by the account holder(s), aggregating to 100 per cent,” says Dutta.

 

This option applies only to deposit accounts. It suits those wishing to distribute liquid assets among several beneficiaries.

 

“Simultaneous nomination is restricted to deposit accounts because money is easily divisible. In contrast, successive nomination is mandated for lockers and safe-custody items because physical assets are often non-divisible,” says Singhania.

 

It is possible to specify unequal shares among the nominees. “The only non-negotiable requirement is that the total must equal exactly 100 per cent,” says Ashutosh K Srivastava, partner, SKV Law Offices.   

 

If shares are not specified, the bank may assume equal shares by default.

 

Nominees are only representatives of legal heirs and beneficiaries, and are not the owners. The nominee’s role is limited to receiving and facilitating the transfer of the money to the legal heirs.

 

Minor child as nominee 

Minors can be nominated, but a guardian must be named to manage the funds until the child turns 18. “The bank will hold the funds in trust for the minor and release them only through the appointed guardian. Once the minor turns 18, the entitlement vests directly in the nominee,” says Singhania.

 

This arrangement safeguards the funds. “It prevents situations where substantial sums might be at risk due to a minor’s inability to make mature financial decisions,” says Srivastava.

 

Joint account with survivor clause 

In such an account, the surviving spouse can operate or close the account after one spouse’s death. The nomination comes into effect only after both spouses have passed away.

 

“The nominee should be someone who will receive the funds after both spouses have passed away, not the surviving spouse,” says Alay Razvi, managing partner, Accord Juris.

 

Align nominations with estate planning 

A bank nomination does not override a will or succession law. Nomination should be viewed as a practical way to collect money easily from the bank after the depositor’s death.

 

“For accounts and fixed deposits, nominee percentage shares should total 100 per cent, mirroring the division in the will. For lockers, only successive nominations are permitted, so nominees should be listed in the same order as in the will,” says Razvi.

 

Nominations should remain consistent with the depositor’s will, trust, or estate plan. Disparity between nomination and will can lead to friction among heirs. “It can also lead to denial of release by banks or avoidable probate litigation,” says Tushar Kumar, advocate, Supreme Court of India.

 

He suggests including a clear statement in the will that the nominee holds the bank proceeds in a fiduciary capacity for the will’s beneficiaries, says Kumar.

 

Keep nominations updated 

Nominations should be reviewed regularly. “They must be revisited after major life events such as marriage, childbirth, divorce, or restructuring of ownership in joint accounts, and in any event, every three to five years,” says Kumar.

 

Razvi warns that outdated nominations can misdirect payouts despite what is stated in the will, since banks release funds promptly to nominees.

 

When updating, depositors must cancel the previous nomination, register the new one, and obtain written acknowledgement from the bank. 

Mistakes to avoid 

• Many customers treat nomination as a bequest, which it is not
• Many fail to specify percentage shares totalling 100 per cent in simultaneous nominations, creating ambiguity and friction
• In joint accounts, unilateral nomination without consent of the co-holder is invalid
• Leaving outdated contact details for nominees can delay settlement