Bank Nomination vs Legal Heir: Who Really Gets the Money?

A nominee is the person a bank, company or insurer pays when the account holder dies. For bank deposits and shares, being the nominee does not make that person the owner. The nominee receives the money and holds it for the legal heirs, who take it under the applicable succession law or the will. Life insurance has a special rule in Section 39(7) of the Insurance Act for parents, spouse and children, though courts are divided on how far it goes. Since 1 November 2025, you can name up to four nominees for a bank deposit.

What a nominee really is

Nomination solves a practical problem. When a depositor dies, the bank needs to know whom to pay without waiting for the family to sort out inheritance. Section 45ZA of the Banking Regulation Act, 1949 lets the bank pay the nominee and be discharged. That is all. It does not decide who finally owns the money.

In Ram Chander Talwar v. Devender Kumar Talwar (2010), the Supreme Court held that a nominee under Section 45ZA does not become owner of the deposit; the amount still goes to the heirs under succession law. In Shakti Yezdani v. Jayanand Jayant Salgaonkar (decided 14 December 2023), the Court held that nomination of shares under company and depository law also does not override succession law. The Court said nomination is not a “third mode of succession” alongside a will and intestate succession.

So if Rakesh nominates his brother for his fixed deposit but dies leaving a wife and two children, the bank can pay the brother. The brother must then hand it over to the wife and children, who are Class I heirs under the Hindu Succession Act. See who inherits property without a will.

Up to four nominees from 1 November 2025

The Banking Laws (Amendment) Act, 2025 changed the nomination rules for banks. The government notified that the nomination provisions came into force on 1 November 2025.

• Deposit accounts: you can name up to four nominees, either simultaneously or successively.
• Simultaneous nomination: all nominees get a share at the same time, in the percentages you specify. The shares must add up to 100%.
• Successive nomination: nominees are placed in order. The next one becomes entitled only if the one above has died.
• Lockers and articles in safe custody: only successive nomination, up to four persons.

More nominees make the bank’s job easier. They still do not change who inherits. If your nominee and your heirs are different people, the safest course is to make a will. See how to write a will in India.

The insurance exception: Section 39(7)

Life insurance works a little differently. The 2015 amendment to Section 39 of the Insurance Act, 1938 says that where the policyholder nominates a parent, spouse or child (or any of them), the nominee becomes “beneficially entitled” to the policy money, unless it is shown that the policyholder could not have conferred that beneficial title. Other nominees, such as a brother or friend, collect the money for the estate.

Courts have not read this provision the same way. Some High Courts have held a spouse, parent or child nominee to be the owner of the money. The Allahabad High Court, in Kusum v. Anand Kumar (2025), held that even such a nominee does not shut out other legal heirs, and that succession law prevails. The Supreme Court has not yet settled the point under the amended Section 39. If an insurance claim is disputed within the family, take advice on the law of your state’s High Court.

When there is no nominee

1. Ask the bank for its claim procedure. Banks have simplified procedures for claims by legal heirs, usually with the death certificate, an affidavit, an indemnity and a letter of disclaimer from other heirs. Limits for the simplified route are set by each bank’s policy.
2. Get proof of heirship. A legal heir certificate or family register extract is usually asked for. See legal heir certificate in Uttar Pradesh.
3. Succession certificate for larger amounts or disputes. For debts and securities, the civil court grants a succession certificate under the Indian Succession Act, 1925. See succession certificate procedure.
4. If the bank delays, complain to the bank and then to the RBI Ombudsman. See RBI Ombudsman under RB-IOS 2026.

Frequently asked questions

Is my nominee the owner of my bank account after my death?

No. The nominee receives the money and holds it for your legal heirs or those named in your will.

Can I name four nominees for my savings account?

Yes, from 1 November 2025, up to four, either simultaneously with fixed shares or successively in order.

Can I name simultaneous nominees for my locker?

No. For lockers and safe custody articles, only successive nomination is allowed.

My mother is the nominee on my late father’s LIC policy. Do my siblings get a share?

Section 39(7) says a spouse nominee is beneficially entitled, but High Courts are divided on whether that defeats other heirs. Take advice based on your High Court’s view.

Does a will override a nomination?

For bank deposits and shares, yes: the nominee holds the money for those entitled under the will or by succession. Insurance under Section 39(7) is the contested area.

Quick quiz

Learn inheritance, nomination and wills in plain language in the Certificate Course in Everyday Law for Every Indian (₹349).

Sources

• Banking Regulation Act, 1949: Section 45ZA and related nomination provisions
• Banking Laws (Amendment) Act, 2025: nomination provisions in force from 1 November 2025
• Insurance Act, 1938: Section 39, especially Section 39(7)
• Ram Chander Talwar v. Devender Kumar Talwar, (2010) 10 SCC 671
• Shakti Yezdani v. Jayanand Jayant Salgaonkar, Supreme Court, 14 December 2023
• Kusum v. Anand Kumar, Allahabad High Court (Lucknow Bench), 2025
• Hindu Succession Act, 1956: Section 8; Indian Succession Act, 1925 (succession certificate)

This page is for education and general information, not legal advice for a specific case. Law as on 29 October 2026.