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What is a Nominee in a Bank

Every time an individual is filling out a form to apply for a bank account or an investment, there is a separate section that needs to mention a nominee.

This section needs to be filled by the applicant during the process of applying or registration. Get the details of a nominee and the meaning of a nomination here.

Nomination and Nominee Definition

Nomination is the service that enables the account holder or any other financial instrument investor to name someone to claim the deposit or the investment after the original owner of the asset or account passes away.

Therefore, the nominee is the person (or, in some cases, a firm) that the person has mentioned in the section of nomination for the asset or account that they are the legal holders of.

What is Nominee in Bank?

A nominee in bank means, as already mentioned, is someone who has been designated in the bank application as the person who would receive the proceeds of the account in the case of unexpected death. Anyone that the applicant considers to be the first relative could be mentioned.

Some banks also allow the applicant to mention several nominees and assign percentages to each one according to their bank deposit amount. If there is no specific percentage mentioned, then the bank would equally split the amount among all of the nominees.

The Nominee in Bank and Its Importance

The process of nomination is a critical task in the overview of bank procedures, and it causes ease of settlement of the funds of the actual account holder. RBI has produced proof of thousands of crores of unclaimed possession due to lack of nominee mention.

Therefore, it stands important for every account holder to mention a nominee during the application for a new deposit or bank account.

The process of nomination can process the person's assets to their nominee much easier in the event of death.

When the account holder's lawful heirs have not been mentioned as the nominee, it is a longer procedure to claim the account's funds from the bank.

The Major Differences Between a Lawful Heir and a Nominee

The table below presents the distinctions between a legal heir and a nominee in detail:

 

Nominee

Legal Heir

Meaning

The nominee in the bank account meaning, the person who has been nominated by another to act as the custodian of the accounts in the event of death.

The legal heir is the one who is the successor and whose name has been mentioned in the will of the deceased person.

Role

The nominee in a bank means the trustee.

The legal heir, on the other hand, is the beneficiary.

Determined By

The nominee is determined through a nomination by the account holder.

The lawful heir is determined by the will or the provision of the succession law.

 

Who can be a Nominee for a Bank Account?

A nominee for a bank account needs to be on the following list:

  • A nominee in bank account meaning an individual who the holder of the account trusts could be the nominee (it could be a member of his family, child, spouse, relative, and more).
  • If the nominee is not the legal heir, he or she will not be entitled to the funds.
  • The nominee's duty becomes to act as the trustee and transfer funds to the legal heirs.
  • There can be different nominees to different bank accounts with the same names.
  • A minor can also be the nominee of an account, but the minor will have to be designated by a guardian, and the bank will have to give the funds to the guardian.

What Happens When There is No Nominee?

When the account holder has passed away, and their person has not made any nomination, the legal heirs will have to go through the procedure of claiming the account's funds.

General Bank Nominee Rules

Here are some general terms and conditions that apply to the nomination of a bank account:

  • There usually needs to be a single nominee for a singly held bank account.
  • A resident can also choose to nominate an NRI, but the repatriation of the sum will be only after the permission of the Reserve Bank of India.
  • A person that has been legally empowered to operate the account of a minor can also file the nomination on behalf of the minor.

Every applicant needs to make a nomination with the form of the Banking Companies (Nomination) Rules 1985.

There can be changes to the details of the nomination during the subsistence of the account relationship by filling the same form as mentioned above.

What is a Nominee in a Bank - FAQs

What is a nominee meaning in a bank?

A nominee is a custodian; he or she will overtake the responsibility of making sure that the legal heir of the depositor will get the money from the account. In many cases, the legal heir could be the nominee.

What happens when there are no instructions left behind in a deposit holder's account?

In this case, there are two instances:

- The bank would try to get in touch with someone related.

- If no one could be reached, the bank would reinvest the sum or park the money until someone comes to claim it.

How many nominees can I appoint for my bank account?

The upper limit to the number of nominees will vary according to investment, but usually, banks will only allow one nomination.

Can I change my nominee after I have already mentioned it?

Yes, the change of nominee can be done by filling up a form.

Can I make a friend a nominee to my bank account?

Yes, anyone, including a minor, can be mentioned as a nominee for the bank account.

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