Nominee in Bank - Meaning, Who can be, Benefits and Nominee Rules

By Rucha Khedkar

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Updated on: Mar 26th, 2025

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3 min read

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. 

What is a Nominee in a Bank?

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 and Nominee Definition

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.

Who can be a Nominee in a Bank?

You can declare a nominee in bank account only if he/she falls under this list of eligibility criteria:

  • A nominee for a bank account is a trusted person selected by the account holder, such as a family member, child, spouse, or relative.
  • A nominee is a trustee and transfers the funds to the legal heir.
  • The nominee cannot keep funds if they are not a legal heir. Legal heirs are those entitled to receive money by law.
  • A minor can be named a nominee, but an adult guardian must be appointed to receive the funds.
  • An account holder can designate different nominees for each of their bank accounts.

Benefits of having a Nominee

These are the benefits of having a nominee in the bank:

  • Hassle-Free Fund Transfer: By appointing a nominee, you can ensure that your money is easily transferred to your selected beneficiary after your passing.
  • Legal Clarity: A nominee clearly defines the beneficiary and reduces the chances of disputes among family members regarding who will get the funds.
  • Immediate Support for Dependents: If your nominee is financially dependent on you, the nomination process allows them to get instant access to funds after your demise.
  • Prevention of Unclaimed Funds: Assigning a nominee can help prevent your funds from becoming unclaimed. A significant amount of money remains unclaimed in banks due to the lack of nominated beneficiaries. 
  • Flexibility in Appointing Nominees: You can easily change or update your nominee in different situations, such as marriage, divorce, or children's birth. 

Nominee in Bank Rules

To understand the rules for selecting a nominee for your bank account, read below:  

  • Single Nominee: You can select only one person as the nominee for a bank account.
  • Minor Accounts: Only an individual legally authorised to act on behalf of the minor may select a nominee for minor accounts.
  • Joint Accounts: In the case of joint accounts, all depositors must jointly make the nomination.
  • Non-Resident Nominees: You can appoint a non-resident as your nominee. However, in the event of death, they will receive the funds in their Non-Resident Ordinary (NRO) Account.
  • NRI Nominees: If you reside in India, you may appoint a Non-Resident Indian (NRI) as your nominee. However, you need prior clearance from the RBI before transferring funds overseas.

Comparing Nominee and Legal Heir

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

What Happens When There is No Nominee?

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.

To Sum Up

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?

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