What is Nominee in a Bank

You ardently save your hard-earned money in your Savings Account to meet the existing and future requirements of your near and dear ones, But did you ever think if you are out of town for some work and your family needs help accessing the funds? Even though it is not pleasant to think about such things, to guarantee your family’s safety, it is important to have a nominee in a bank. The nomination facility ensures that your family easily gets access to the funds. When you fill out the application to open a bank account, you need to enter the nominee's name. The blog will cover what is a nominee in the bank, its importance, who is eligible, general rules, and important things to remember while nominating someone. Read on to know more!

What Is a Nominee In a Bank?

So, what is a nominee in the bank? A nominee in a banking institution is a person who is designated as an individual who is eligible to get the proceeds of the account after the unexpected demise of the account holder. You can consider anyone from your family members or someone whom you consider as your first relative.

A few banking institutions also let you specify numerous nominees and allocate percentages to everyone per your bank deposit. If a particular percentage is not mentioned, the banking institution will equally split the proceeds among the nominees.

Nominees are beneficiaries or recipients of the assets, funds, or investments. Considering the nature and tenderness of the position, nominees are family members or someone close to you in or outside your family.

Significance of Nominee in a Bank

The primary reason for appointing a nominee is that the nominee can get benefits in case of the account holder’s unfortunate demise. If there is no nominee, family members or the legal heir will have to go through an exhaustive procedure to get the proceeds of investment and assets of the deceased account holder.

According to the rules and regulations set by a banking institution, a nominee can claim the benefits if the account holders have appointed a nominee. It saves time and effort for legal heirs and nominees. Nominations give transparency about who should get the funds in case of unfortunate incidents. The nomination procedure is vital in bank processes and makes the fund settlement process effortless. RBI has unclaimed possession because of the absence of the nominee mentioned.

Hence, you must mention a nominee when applying for a new deposit or opening a new bank account. The nomination procedure can process an account holder's proceeds to the nominee in case of the unexpected demise of the depositor.

Who is Eligible to Become a Nominee in a Bank Account?

A bank account nominee needs to be someone from the following list:-

• A nominee in the bank can be a family member, close relative, friend, and person whom the depositor trusts the most.
• Suppose the nominee is not the legal heir. In that case, the nominee is not entitled to the funds.
• The nominee has to serve as the trustee and transfer the proceeds to the legal heirs.
• Different bank accounts can have different nominees bearing the same names.
• A child can also become an account’s nominee, but a guardian must be designated, and g the guardian must get the funds.

General Rules While Appointing a Nominee

Here are some general rules, regulations, terms and conditions applicable while appointing a nominee to a bank account:-

• Single nomination for bank accounts taken care of singly
• According to RBI, if you appoint a nominee who is a non-resident Indian, the reinstatement will only take place after the Reserve Bank of India permits.
• An individual who legally has the power to operate a bank account on a minor’s behalf can also appoint a nominee.
• Everyone needs to appoint nominees per the Banking Companies Rule 1985.
• As the depositor and account holder, you can change the nominee whenever you want.

Things to Keep in Mind When Appointing Someone as a Nominee

Here are points that you must remember while appointing a nominee:-

• Furnish necessary information, including your relationship with the nominee
• Specify names and information about your nominee rather than generally writing ‘wife’ or ‘children’.
• Suppose you are appointing a minor as your nominee. In that case, furnish details of a legal guardian or appointee.
• If you want to appoint more than one nominee, you must inform the other nominees.
• Setting aside some time to go over your financial instruments, assets, and bank accounts
• One account can have a nominee.
• You can delete or cancel a nomination anytime. For that, you have to fill out form number DA2, and to change the nominee, fill out form number DA3.

Differences Between a Nominee and a Legal Heir

The differences between a nominee and a legal heir are as follows:-

• The nominee in a bank account is the individual you have nominated to be the custodian of your account in the case of unfortunate incidents. On the other hand, the legal heir is the person or successor whose name the depositor or account holder has mentioned in the will.
• Nominees in banking institutions mean trustees, whereas legal heirs are the beneficiaries.
• Nominees are ascertained with the help of a nomination by the depositor or account holder. On the other hand, provisions or the will ascertain legal heirs. 

Conclusion

The appointment of a nominee guarantees a provisional agreement to handle the legal and financial matters. A nominee’s role in a bank account is more than unjust a formality. It is vital in financial planning to ensure your assets are secured and transferred seamlessly for your near and dear ones. You can choose a reliable nominee, maintain up-to-date instructions, grasp legal problems, interact openly, and safeguard your financial legacy. You can save separate nominees for different bank accounts, like fixed deposits, savings, recurring deposits, etc., in the same bank. A child can also be an account’s nominee, but a guardian must designate the minor, and the bank should give funds to the guardian. For more details about what is nominee in bank.