Banking Laws (Amendment) Bill Passed: 4 Nominations Now Allowed In Bank Accounts - What Does It Mean For You

Bank account holders can now make up to four nominees in their bank accounts. The Lok Sabha passed the Banking Laws (Amendment) Bill on December 3, 2024, enabling this new provision. The bill, proposing changes to the nomination rules in bank accounts, was introduced in August this year to provide greater convenience and flexibility for customers.

Finance Minister Nirmala Sitharaman, during the debate on the bill, stated that there will be an option for either ‘successive’ or ‘simultaneous’ nominations for bank accounts. However, only ‘successive nomination’ will be permitted for locker holders.

What Do Four Nominations Mean?

The option of making four nominees in the bank accounts means more flexibility to the customers in choosing more than one person as their nominee and dividing account holdings among them. One more important benefit and purpose of more than one nominee is to reduce the unclaimed deposits in the Depositor Education and Awareness (DEA) Fund, which is growing every year.

As per the annual report of the RBI, unclaimed deposits grew from Rs 62,225 crore at the end of March 2023 to Rs 78,213 crore at the end of March 2024, indicating a 26 per cent increase in one year. With more nominees in one account, there are high chances of awareness about the account and claims the unclaimed amount.

Simultaneous And Successive Nomination:

• Simultaneous nomination means that all nominees are simultaneously eligible to receive the account proceeds in case of the accountholder's death. The nominees will be eligible to receive the amount as per the percentage specified by the deceased account holder.

• Successive nomination means that even if there is more than one nominee, all are not eligible to receive the proceeds from the account at the same time. The nomination in this case will become effective for one nominee at a time in the order specified by the account holder. So, upon the death of the account holder, the first nomination will become effective and in the absence of the first nominee, the second nomination will become effective, and so on.

Until now, only one nomination was allowed in bank accounts, regardless of whether it was a single or joint holding account. However, bank account holders can now nominate up to four individuals for their bank accounts, including fixed deposits. For lockers and safe custody, a separate nomination form is required. Previously, only up to two nominations were allowed, but now this limit has also been increased to four.

As Union Finance Minister Nirmala Sitharaman stated during the passing of the bill, “The proposed amendments will strengthen governance in the banking sector and enhance customer convenience with respect to nomination and the protection of investors."