Savings bonds don’t carry nomination option for joint holders

Entitled legal heirs to these financial instruments will have to face a lot of time-consuming paperwork and legal hassles if these bonds are transmitted to them

According to the government of India’s 2003 notification, savings bonds do not carry a nomination option for joint holders. With no nomination facility available, any entitled legal heir will have to face a lot of paperwork and legal hassles for inheriting the funds accrued in such bonds.

“I thought nomination is mandatory for all financial assets as well as physical assets. Didn't all co-operative societies make it compulsory for members to have a nomination some years ago? I just discovered this when I received a bond certificate (for the Govt of India 8% savings bonds) with the section 'Nomination Registered at Sr No' struck off,” said Dr Nita Mukherjee, a well-known researcher.

According to the 2003 notification, the sole holder or a sole surviving joint holder of bonds can nominate one or more persons who shall be entitled to the bonds and the payment in the event of his or her death. This means that only the surviving member of a joint bond account can nominate someone. ”The government presumes that both holders of a joint bond account won’t expire at the same time,” said Bhavesh Gagiwala, a certified financial planner (CFP) at Falguni Investment.

Mr Gagiwala added that joint holding allows three applicants—and the government didn’t think that nominees were a necessary option. “Some of our rules are so weird and you can’t complain or take it up to someone, as this is a government scheme,” said Yogin Sabnis, a CFP from VSK Financial Consultancy Services.

But nomination is the simplest way for transfer of funds to legal heirs during the time of death. Without such nominations, heirs have to do a lot of paperwork and spend a lot of money and time to get the assets. “If there are no slots for nomination, which is your inherent right, then that is a tremendous issue,” said Vivek Rege, MD, VR Wealth Advisors Pvt Ltd.

A legal heir entitled to these assets would have to do a lot of paperwork, which include signatures from various relatives and the filling up of a nomination or succession form. These signatures would be proof for the issuing authority of these financial instruments in order to release the assets.

Added to that, heirs who have not been expressly nominated would also have to issue advertisements informing the public that they are the legal heirs and should receive no objection from their relatives. The entire scenario becomes very time-consuming and the heirs have to shell out a lot of money for legal fees.

On 20th April, the Bombay High Court had ruled that in case of transmission of shares, all ownership rights will vest with the nominee rather than the legal heirs.

Mr Sabnis said that the rule may have been implemented in order to reduce conflict. This is a major lacuna in whole process and leaves a lot of unanswered questions for customers.

However, certain banks provide you with a separate nomination form when you want to open a savings account. However, it is not compulsory for banks to have a separate nomination column.


SEBI plays double standards on Standard Chartered IDR issue

While the big multinational Standard Chartered Bank was allowed to blank out disclosure of litigation, then why were Indian banks such as Lakshmi Vilas Bank and United Bank of India not allowed this favour?

Even as the first-ever Indian Depository Receipt (IDR) issue of Standard Chartered Plc is set to open in the Indian capital markets on 25 May 2010, questions about its non-disclosure of numerous litigations still remain open. The bank’s name was involved in the 1992 Harshad Mehta securities scam, which rocked the Indian capital market. However, the Securities and Exchange Board of India (SEBI) has turned a blind eye over all its pending litigations and has quietly passed the red herring prospectus (RHP), while Lakshmi Vilas Bank Ltd and United Bank of India have had to disclose all their pending litigations.

Standard Chartered has been taking the stand that the litigation is not ‘material’. The question then remains, why did SEBI seek a disclosure from these two Indian banks?

Lakshmi Vilas Bank Ltd, in which the Harshad Mehta Group held 2,700 shares in connection with the 1992 securities scam, disclosed the case in its draft red herring prospectus which reads: “The Bank has 14 cases as on date involving title suits relating to shares between various parties wherein the Bank is a proforma party and awaiting decision of the said courts. Noteworthy to mention is a case filed in the Sub Court under Special Court (TORTS) Act, 1992 by the Custodian in 1996 for shares held by (the) Harshad Mehta Group totalling 2,700 shares held by various parties and the matter is still pending.”

Similarly, United Bank of India, which hit the market earlier this year, disclosed all its cases against its chairman and directors, civil proceedings, labour and employment cases and other cases related to the bank. There was no mention of the bank’s involvement in the scam. The RHP had one case filed by SEBI against the bank, 18 civil cases, approximately 162 cases pertaining to labour and employment issues (as on 1 March 2010) and three other cases.

“As of the date of this Draft Red Herring Prospectus, neither the Company, any member of the Group, any Director, or any material associate of the Company (emphasis ours) are involved in any material governmental, legal or arbitration proceedings or litigation and the Company is not aware of any pending or threatened material governmental, legal or arbitration proceedings or litigation relating to the Company, any member of the Group, any Director or any material associate which, in either case, may have a significant effect on the performance of the Group, and there are no liabilities or defaults (including arrears and potential liabilities) in relation to such material proceedings or litigation which would be required to be disclosed under the SEBI Regulations,” states page 419 of Standard Chartered’s red herring prospectus.

However there are at least half-a-dozen cases filed against the bank by the Enforcement Directorate in 2002.

Earlier, Arijit De, head of external communications of Standard Chartered India replied to an email query by Moneylife: “The IDRs represent the shares of Standard Chartered (SC) plc, UK, the ultimate parent company of Standard Chartered Bank, India. In accordance with the disclosure requirements under SEBI Regulations, IDR Rules, other applicable laws and international practice, SC plc has made appropriate disclosures of all material issues in the draft offer document filed with SEBI. We have nothing further to add beyond what is disclosed in the DRHP.”

Moneylife had previously reported about this issue and had raised the matter with SEBI but we have still not received any response.
(Read here:



bodla mohan

6 years ago

would u please quote nav of stanadard chartred Mutual fund schemd G207 sceef-growth


6 years ago

I can’t understand the rationale for why Standard Chartered is doing an IDR.”The issue will also increase our market visibility and brand profile, apart from giving Indian investors an opportunity to participate in our growth,” said Peter Sands, group chief executive.I can’t understand the logic of the above statement.If its a PR exercise why not buy some ad slots?


6 years ago

In the same scam Air India's money was involved - if I recollect properly - to which mention was made by JPC Comittee, now again in a recent loan matter with Air India, this bank is involved. I think other banks have
made some complaint to RBI recently
there was a news item.


6 years ago

We Indians dont want to hurt the sentiments of Foreign cos/people.
What ever they do is good for us.
Please keep quiet dont disturb/hurt the sentiments.
What ever they disclose it is okay,even if they dont disclose it is okay.
Why Money Life wants to bring out all these small things i can't understand?

parackal thomas

6 years ago

It is still not late to take up the matter with higher authorities including THE MINISTER OF FINANCE-what affects an Indian subsidiary affects the Parent Uk company as well being fully owned by them now. Money life needs to be PRO ACTIVE and seek answers.

The motormen imbroglio: Will Mumbai grind to a halt again after 15th June?

Mumbai city was paralysed when the Central and Western Railway motormen went on strike early this month. A fast-track committee is expected to look into their demands and a decision is expected on 15th June—but will anything happen?

Mumbai’s local train service, which is the city’s lifeline, came to a standstill due to the Central and Western Railway motormen strike early this month. The strike also witnessed members of Parliament, including Sanjay Nirupam, raising the issue in the House. The strike ended on the second day after it had started (4th May). However, the issue has still not been resolved. Mumbai’s denizens may be hit by another strike after 15th June, as the ‘fast-track’ committee is not empowered to deal with this issue.

In fact, the committee is not the right authority to resolve the issue. In 2006, a new wage settlement was decided based on the recommendations of the Sixth Pay Commission. This wage settlement was for all government and public sector employees.

The new wage settlement reduced the eight pay-scale categories to four pay-scale categories for the Indian Railways. With this reduction, railway guards were clubbed along with motormen for the first time in the same category. Before that, guards along with a few other positions were on a lower pay scale than the motormen. This is now a major issue for motormen, who have been affected by the changes, and that is the crux of the problem.

Motormen believe that their services have not been valued as they have been placed on par with positions which earlier were a part of a lower grade.

Moreover, the motormen were also encouraged by a political party in their agitation. Faced with negative political fallout and a possible law-and-order problem, the Maharashtra Home ministry patched up a face-saving act by announcing that a
fast-track committee would be set up to resolve the matter.

The sanctity of the Sixth Pay Commission’s recommendations is higher than what the fast-track committee can decide upon.

The authorities who can decide the issue are the Departmental Pay Anomaly Committee and the National Pay Anomaly Committee. The motormen’s union has already appealed to them and their case is still pending.

While 15 June 2010 is the new date for the fast-track committee to take a decision, it cannot do so. Incidentally, the Bombay High Court’s hearing on the same case is also scheduled for 15th June.

Will the motormen dare to cripple Mumbai again? If they do so, it will be after the monsoon has set in and public anger will be even worse than before.

Besides other demands, the motormen’s union has also asked to raise the kilometre ceiling to 300km. Motormen working in the Central and Western Railway are entitled to payments equivalent to a minimum of 150km driven by them.

The Indian Railway Board is fairly placed to decide this issue by itself. The union has also demanded special leave entitlements for motormen, which again, is most likely to be rejected. It would be difficult to discriminate among railway workers, by allowing special leave entitlements exclusively for motormen.

With such constraints, it remains to be seen how motormen will act after 15th June, as a second strike is likely to trigger more public anger.

“You will have to contact the fast-track committee for these details,” said SS Gupta, chief public relations officer (CPRO), Mumbai division, Western Railway.


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