Bank deposit, locker holders can soon name up to 4 nominees

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Soon, deposit holders or locker holders can name up to four persons as nominees, according to a new Bill containing this provision that was introduced in the Lok Sabha on Friday. The Bill also has provisions for new reporting dates, among others.

‘The Banking Laws (Amendment) Bill “seeks to improve governance standards, provide consistency in reporting by banks to the RBI, ensure better protection for depositors and investors, improve audit quality in Public Sector Banks, and extend the tenure of the directors (other than chairperson and whole-time director) in co-operative banks,” a government source said.

The Bill seeks to amend the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, the State Bank of India Act, 1955, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. However, amendments in all these acts have nothing to do with the lowering of government holding or privatisation of public sector banks.

Nominees

The bill proposes changes in the Banking Regulation Act to facilitate more number of nominees for the payment of depositors’ money, the release of contents of safety lockers and the return of articles kept in safe custody with banks. 

Currently, only one nominee is permitted for these cases, but post the enactment of the new law, the number of nominees could increase to four. However, there will be some conditions.

In case of deposits, four nominees will be permitted with two options. Either, the primary holder(s) has to give priority to all four or mention the share of each nominee. In case of the priority, the nomination shall be effective only in favour of one person in the order of priority. This means the nomination of the first nominee will be effective if she/ he survives the person(s) who made the nomination. After the death of the first, second or third, the next nominee will become effective only. The priority mechanism will also be made available for nomination made in case of lockers and safe custody.

According to sources, the higher number of nominees for depositors’ money aims to reduce unclaimed deposits in banks. Data show that as of March 31, 2023, the total amount under unclaimed deposits with public and private sector banks combined rose to over ₹42,000 crore from around ₹33,000 crore a year ago. Balances in savings/current accounts that are not operated for 10 years, or term deposits not claimed within 10 years from the date of maturity are classified as ‘unclaimed deposits’. It could be because of many reasons including the death of the primary holder and no sign of the nominee.

These amounts are transferred by banks to the Depositor Education and Awareness (DEA) Fund maintained by the Reserve Bank of India. The depositors are, however, still entitled to claim the deposits at a later date from the bank(s) where such deposits were held along with interest, as applicable.