Nominee Rights in Bank Deposits

The case of Manoj Kumar Sharma v. Union Of India And Another, 2024 (WRIT - C No. - 8197 of 2024), Allahabad High Court highlights the legal rights of a nominee under the Banking Regulation Act, 1949 and the claims of legal heirs under succession laws.

After the petitioner’s mother passed away in 2020, the petitioner, the nominee in all her Fixed Deposit Receipts (FDRs) in the Bank of Baroda, asked the bank to release the funds. The bank refused, citing succession issues, even though Section 45ZA of the Banking Regulation Act gives nominees the right to receive such funds after the depositor’s death.

The Reserve Bank of India’s Circular No.: RBI 2004-05/490 of June 9, 2005, further directs banks to release funds to nominees without insisting on documents like succession certificates, provided all formalities are completed.

Importantly, the Supreme Court, in Ram Chander Talwar v. Devender Kumar Talwar (2010), clarified that being a nominee doesn’t make you the owner of the money. The funds belong to the deceased’s estate and must be distributed according to inheritance laws.

The Allahabad High Court agreed, allowing the petitioner to receive the funds but directed him to file an affidavit before the Bank of Baroda that the money being received by him is being held by him in trust and undertakes to make payment of the same to the legal heirs as and when decided.

In a nutshell, the law supports a nominee's right to access funds quickly. However, the nominee as a trustee of funds must respect and fulfill the legal heirs' claims as decided by the courts.

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