On 17 January 2025, the Reserve Bank of India (RBI) notified banks and non-banking financial corporations (NBFCs) to ensure that all savings accounts and fixed deposits have nominees. The nominee section of a bank account is critical when filling out a new bank account opening form.
So, who is a nominee? In this blog, you will understand who can be a nominee and the benefits, rules, and detailed differences between a legal heir and a nominee.
A nominee in a bank is a person designated by an account holder to receive the account’s funds in the event of the account holder’s death. This ensures that the transfer of assets does not require any legal intervention or probate.
The nominee acts as a trustee, holding the funds for the legal heirs. While the nominee gains temporary control over the funds, they are not necessarily the ultimate beneficiary unless they are also a legal heir. Appointing a nominee clarifies and reduces disputes, simplifying the settlement process for the bank and the account holder’s family.
Nomination is a service that allows the account holder or any investor in financial instruments to designate an individual who can claim the deposit or investment after the original owner of the asset or account has passed away.
On the other hand, the nominee is the individual (or, in certain instances, an organisation) designated by the account holder in the nomination section for the asset or account, indicating that they are the rightful recipient.
You can declare a nominee in bank account only if he/she falls under this list of eligibility criteria:
These are the benefits of having a nominee in the bank:
To understand the rules for selecting a nominee for your bank account, read below:
To avoid any confusion between a legal heir and a nominee in the bank, you must know the following:
Criteria | Nominee | Legal Heir |
Definition | A nominee is the person designated to receive assets or funds upon the account holder's death. | A legal heir is an individual who is entitled to receive assets as per law or a will. |
Ownership Rights | The nominee has limited rights and acts as a custodian for the legal heirs. | A legal heir holds complete ownership rights over the assets. |
Role | Acts as a trustee, responsible for managing and transferring assets. | Acts as a beneficiary entitled to claim and manage the assets. |
Determination | Based on the nomination made by the account holder. | Determined by personal laws or provisions in a will. |
Revocability | You can change or revoke the name of the nominee by the account holder at any time. | Once you choose a legal heir, you cannot revoke |
Decision-making typically shifts to alternative processes when no nominee for a position exists. This may trigger extended deadlines, new nomination rounds, or appointments by an authorised body in elections or organisations. Courts may appoint an administrator to manage the estate for legal matters, such as wills without a nominated executor.
Moreover, if no one qualifies, the award may remain ungranted. The lack of a nominee can delay proceedings, create uncertainty, or lead to disputes. Addressing the absence depends on the specific rules, laws, or guidelines governing the situation.
A nominee in a bank account is crucial to ensure the smooth transfer of assets and financial security for your loved ones. It simplifies the legal and procedural hurdles that may arise after your demise. You can make informed decisions by understanding the rules, benefits of having a nominee.
Related Article:
1. Nomination in Demat Account
2. How to Add a Nominee in Mutual Funds Online?