Govt to allow upto four nominees in deposit, locker accounts in a bid to bring unclaimed deposits down

A new Bill proposed in the Parliament has a provision which says that deposit and locker holders can name up to four nominees instead of one.

The Bill that carries this provision is Banking Laws (Amendment) Bill which was introduced in 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, reported Hindu Business Line.

It is interesting to note that the Bill seeks amendment in a number of laws such as 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.

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

Two options

The change in nominees will come with some conditions. There will be two options of choosing four nominees. The primary holder (s) has to give priority to all four or mention the share of each nominee. If the depositor chooses priority, the nomination will 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. The priority mechanism will also be made available for nomination made in case of lockers and safe custody.

What are unclaimed deposits?

Balance in savings or current accounts which are not operated for 10 years or term deposits not claimed for 10 years from the date of maturity are classified as ‘unclaimed deposits’.

There could be multiple reasons for this such as the death of the primary holder followed by no nomination.

Consequently, these amounts are transferred by banks to the Depositor Education and Awareness Fund maintained by the RBI.

One of the key reasons behind keeping a large number of nominees for depositors’ money is to reduce unclaimed deposits with banks.

Unclaimed deposits with public and private sector banks combined topped ₹42,000 crore from around ₹33,000 crore a year ago, data as on Mar 31, 2023 shows.

Meanwhile, it is vital to note that the depositors are entitled to claim the deposits at a later date from the bank(s) where such deposits were held along with interest, as applicable.