Multi-Nominee Bank Accounts & Lockers: Why Banks are Urging RBI for Clearer Claim Settlement Rules

Mumbai. Thursday, 28 May 2026

A major shift in how Indian banks handle deceased depositors’ assets has sparked an industry-wide call for action. While the flexibility to add up to four nominees to a single bank account or locker was introduced to give customers peace of mind, it has inadvertently opened a Pandora’s box of operational challenges and bitter family disputes.

To mitigate rising litigation risks, banks across India have approached the Reserve Bank of India (RBI) requesting explicit, uniform guidelines on how to navigate multi-nominee claims when disputes arise.

The Core Conflict: Nominee vs. Legal Heir

The fundamental issue stems from a widespread public misconception: most people believe that naming someone as a nominee makes them the ultimate owner of the money. In reality, Indian law views this very differently.

According to consistent rulings by the Supreme Court and various high courts (including a recent reaffirmation by the Orissa High Court), a nominee is merely a trustee or custodian.

Understanding the Roles:

• The Nominee: Functions as a legal receiver. Their role is to collect the money from the financial institution so the bank can safely close the account.

• The Legal Heir: Functions as the rightful owner. Their rights are dictated by succession laws (like the Hindu Succession Act or Indian Succession Act) or a valid Will.

If a deceased account holder names a sibling as a nominee but leaves behind a spouse and children, the bank will release the funds to the sibling. However, the sibling is legally obligated to hand that money over to the spouse and children, who remain the rightful owners under succession law.

Why Banks are Requesting Urgent RBI Guidelines

While the current framework clearly outlines the mathematical share assigned to each nominee, it completely breaks down during practical execution. Bankers are facing severe operational bottlenecks in three major areas:

1. Fractional and Staggered Claims

When an account has three or four nominees, they rarely approach the bank together. If Nominee A brings forward a death certificate and demands their designated 25% share, banks are currently left in a grey area. Releasing fractional amounts without the consent or presence of the other nominees exposes the financial institution to future legal claims.

2. The Physical Impossibility of Splitting Lockers

While digital currency in a savings account can technically be split into percentages, the contents of a safe deposit locker cannot. If multiple nominees disagree on how or when to open a locker, or if one or more nominees remain uncontactable, the bank cannot permit a single nominee to access physical valuables without risking severe liability.

3. Active Legal Injunctions

In many tragic instances, family feuds escalate immediately following a person’s demise. If legal heirs serve a bank with a notice or approach a court for an injunction while a nominee is simultaneously demanding a payout, bank managers are left caught in the crossfire without standardized regulatory protocols to lean on.

What Fresh RBI Guidelines Could Achieve

A comprehensive, standardized regulatory framework from the RBI would bring immediate relief to both financial institutions and grieving families by:

• Standardizing Timelines: Establishing uniform cooling-off periods and explicit windows for all nominees to present themselves.

• Defining Partial Payout Protocols: Outlining whether a bank can legally distribute fractional shares to solo claimants.

• Protecting Banks from Litigation: Providing a clear, legally sound mechanism that releases banks from third-party liabilities once a payout follows the prescribed regulatory path.

• Creating Uniformity: Ensuring a customer experiences the exact same hassle-free protocol whether they deal with a public sector, private, or cooperative bank.

How Customers Can Protect Their Families Today

Until the RBI rolls out explicit multi-nominee operational guidelines, depositors must take proactive steps to prevent their families from facing prolonged legal hurdles:

1. Align Nominees with Legal Heirs: The cleanest way to avoid conflict is to ensure your bank nominees are the exact same individuals who will inherit your wealth under your succession laws.

2. Draft a Clear, Legally Valid Will: A well-drafted Will always takes precedence over general succession acts. Specifying exactly who inherits which bank account or locker eliminates ambiguity and ensures your nominee acts strictly in accordance with your final wishes.

External References

For localized news updates, regional banking changes, and detailed coverage on regulatory developments across India, you can visit the English portal of Matribhumi Samachar at matribhumisamachar.com/en.