A nominee is appointed to make it easier for a banking institution to release funds after the primary account holder’s demise. Such a step helps in avoiding delays and legal complications later on.
Still, another critical aspect that warrants due consideration is what happens if the nominee dies before the account holder? How will the funds be treated in such cases? What are the different possibilities?
The answer to the above questions depends on whether the account has a single, simultaneous or successive . Let us discuss all the different types of cases in detail.
What happens to the nominee’s share?
In accordance with the Banking Laws (Amendment) Act, 2025 and the Banking Companies (Nomination) Rules, 2025, effective from 1 November 2025, an eligible bank depositor can nominate up to four individuals for a Furthermore, such a nomination can be ‘simultaneous’, where every nominee gets a specified percentage, or ‘successive’, where nominees are placed in a specific order.
Now, if a successive nominee dies before the primary account holder or the depositor, the next nominee in the specified order will become effective. This will ensure that the nomination continues without requiring a fresh nomination merely because the earlier nominee is no more.
Section 45ZG and successive nomination
Section 45ZG of the Banking Regulation Act, 1949, deals with successive nominations for bank deposits. It provides that where nominees are named in a specified order, a subsequent nominee becomes effective when the nominee placed ahead of them dies before the depositor. Therefore, the next nominee does not automatically receive the money merely because the first nominee dies; the order specified in the nomination determines who becomes effective.
The position is slightly different for a simultaneous nomination. In this case, if one nominee dies before receiving the deposit, that individual nominee’s nomination alone will become ineffective. Furthermore, the portion of that nominee is treated as if no nomination had been made for that particular portion, whereas the surviving nominees continue to receive their specified shares.
Who gets the money if there is no effective nomination?
It is important to keep in mind that the deceased nominee’s share will not naturally pass to that nominee’s legal heirs or family members. Rather, the relevant portion is treated as having no effective nomination and hence must be resolved and settled in accordance with the applicable procedure for claims relating to the deceased depositor.
The RBI’s Settlement of Claims in respect of Deceased Customers of Banks Directions, 2025, provides a meaningful framework for banking institutions to settle claims involving deceased customers and standardise documentation requirements. In cases where there is no effective nomination, the bank follows the applicable simplified procedure, subject to the prescribed rules, regulations, thresholds, and conditions.
Cases when a court order may be required
Furthermore, where entitlement is disputed, or legal representation is required, documents such as a court-provided succession certificate, , letter of administration or court order may be sought, depending on the facts and circumstances of the case.
It is also vital to note that a nominee’s role is primarily to facilitate the receipt of the deposit from the bank. A simple nomination by no means determines the ultimate beneficiary or provides any ownership clarity regarding the deceased depositors’ funds.
Hence, account holders should diligently review their nominations and understand the applicable rules and regulations, as these are bound to change and evolve over time. It is also essential for account holders to update their nominees in the event of a nominee’s demise.
Finally, vigilance, knowing the most recent rules, legal provisions, and having clarity on associated aspects can prevent delays, discrepancies, and long court battles later on. If faced with such a situation, it is wise to seek guidance from a legal professional in order to ensure proper compliance with banking regulations and long-term .
Disclaimer: This article is for general information only. The actual settlement of a deceased account depends on the account structure, nomination, Will, applicable succession law, court orders and the facts of each case. Readers should consult their bank or a qualified legal professional for case-specific advice.