How To Make Nomination and Succession Frictionless
One outcome of the devastating, once-in-a lifetime pandemic is a grim realisation about our lack of preparedness for unexpected tragedies. Those who have lost loved ones over the past 20 months had to run the harrowing gauntlet of succession issues, while trying to come to terms with their loss. The problem is not limited to the pandemic and its enormity is clear from these numbers.
A collation by puts the value of unclaimed financial assets at a stupendous Rs1.4 lakh crore as on 30 March 2020. This was before the pandemic really unleashed its devastation and the new numbers would be significantly higher.
The sheer number of deaths, often within a family, ought to create a sense of urgency to put in place a holistic, humane and speedy system to deal with transmission and succession issues. Remember, a Will allows a person to decide how to distribute her assets, but the process of fulfilling those wishes is harrowing and urgently needs disruptive reform.
In the hierarchy of vital changes that are needed, fixing our slow, expensive and broken legal system would be at the top of the list, but it is also the most challenging and least likely to happen. A white paper titled ‘Making Succession Smoother and Simpler’ by Pramod Rao for the Association of Registered Investment Advisers (ARIA) notes that it takes 8-10 months (and a fat fee) to obtain a probate in uncontested Wills and around 6-9 years if it is contested—often longer. Succession certificates have a similar time frame. The pandemic has only extended these timelines. Imagine the plight of people who lost multiple family members to COVID-19 after having already depleted their resources on hospitalisation costs.
At a time when savings and investment records are all digitally stored, it is possible to move past incremental improvements and work at a holistic, technology-based solution that will bring about transformational change. The key is for our financial and realty regulators to work together to make this happen. We need to build public pressure to make it happen and move past small modifications.
For instance, on 18th October, the Securities & Exchange Board of India (SEBI) asked (SEBI Asks RTAs To Transmit Securities in Favour of Surviving Joint-holder) registrars to issues and share transfer agents to transmit securities in favour of surviving joint-holder/s on the death of one or more joint-holder/s. This clarification followed a complaint to the regulator.
A few days before this, a Whatsapp forward had resurfaced claiming that a survivor with a joint fixed deposit in a bank cannot break it prematurely and access funds without concurrence from all legal heirs. Astonishingly, this message remains in circulation in October 2021, although the Reserve Bank of India (RBI) has clarified the issue in August 2012. On the death of a joint-holder, banks have been told to permit premature withdrawal without penalty – subject to the existence of a joint mandate obtained from both account-holders while opening the account. But RBI found that banks have neither included this clause in account opening forms nor followed RBI directives to spread awareness about it. A previous circular dated 9 June 2005 was entirely devoted to simplify the nomination and transmission process, which has been updated to insert this clarification.
The core of the circular says that banks need to take necessary precautions while transferring account proceeds to nominees, but cannot make ‘superfluous and unwarranted’ demands such as seeking bonds, indemnities and sureties from the nominees, or it would ‘invite serious supervisory disapproval’. Even where there is no nomination, RBI is clear that banks should keep in view “the imperative need to avoid inconvenience and undue hardship to the common person.” This continues to be ignored.
The 2005 circular says that the Indian Banks’ Association was to formulate a ‘Model Operating Procedure’ to settle claims of deceased account-holders in various circumstances; but banks continue to follow arbitrary processes and demand indemnities and sureties. 
The continued harassment of nominees is solely due to RBI’s half-hearted instructions allowing banks to use their discretion rather than issuing standard operating procedures (SOP) for dealing with nominations and transmission. 
As the ARIA paper says, the need of the hour is a holistic system that works across all assets, puts in place standard rules and protocols for transmission of financial assets and covers the needs of minor children and incapacitated seniors. The question is: Who will bell the cat? Leading banker KV Kamath, in a foreword to the ARIA report, says: “All that this needs is a short and coordinated effort of say six months, from all the parties involved, and if required, facilitated by the Regulators who could consider modifying the regulations to enable the institutions to use these new approaches.” In a few cases, the government might need to modify the governing laws to make this happen, he adds. 
 Some simple steps suggested by ARIA are:
  • Nominees: Equate or elevate nominees to legal and beneficial owners of assets (as opposed to holding them in trust for the heirs) in order to avoid legal processes.
  • Centralised Link: Link nominations to the Customer ID and provide for a mandatory default nomination. I am not in favour of eliminating a person’s right to make an informed decision with regard to a nominee; so the nomination ought to be a default option without making it mandatory.
  • Common Form: Have a simple, common form for nominations across the financial services sector.
  • E-nomination: Develop an e-nomination facility that allows online changes and authentication via OTP or digital signatures.
  • Specific, Successive and Proportional Nomination: Create a simple system that allows specific nominations for various assets, including successive and proportional nomination.
  • Additional Information: An important suggestion, in the online facility, is to capture additional information about nominees such as contact and identity details. The paper-based systems today do not capture such information.
  • Central Database: The ARIA paper suggests a common blockchain-based ledger across banks to maintain a credible history of nomination changes. This would be an important record in case of disputes and can easily be implemented by agencies such as Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI). Centralised reporting of the demise or incapacitation of a financial consumer could trigger proactive outreach by financial service-providers to the nominees.
  • Incapacitated Persons: ARIA seeks a change in rules to enable nominees to access and transact in financial assets of incapacitated persons, after certification by an independent medical practitioner which can be submitted to the financial service-provider. This is a difficult but important requirement, whose need was acutely felt when entire families, and especially the bread–earners, were affected by COVID and could not access their funds. It is also required to care for senior citizens suffering from irreversible brain disorders such as dementia.

    In case of people with savings, there is an urgent need to formulate a policy to allow care-givers to access these funds for their care and treatment, with adequate checks to ensure proper utilisation. There are plenty of reports where wives or daughters of savers have had to approach the high court for permission to access the accounts of their incapacitated spouse and mother, respectively. At present, RBI rules allow a person who cannot sign to withdraw money using a thumbprint or even a toe impression on the cheque/withdrawal form, so long as it is identified by two independent witnesses known to the bank, one of whom must be a bank official. This does not help in degenerative mental disorders which require a permanent solution while the person is still alive and needs his or her money.
  • Minors or Orphans:  A similar situation would arise in the case of minor children orphaned in the pandemic or other calamities, where the savings of deceased parents have to be used, accessed and protected on their behalf until they are independent or capable of managing on their own. The need for a clear policy and processes with adequate safeguards (to prevent misuse and loot) will become more acute as families continue to shrink.
  • Notarising: ARIA also suggests notarised nominations for proof of validity and would like on officer at each major branch to be recognised as a Notary. While the idea of strengthening nominations is good, this adds needless friction to the process as even large tech-savvy private banks may be unwilling to implement it.

    In a recent case before Moneylife Foundation, a large bank insisted on a branch visit with identification documents to close a demat account. Despite a 30-minute process that included form-filling, verification and a personal sign-off by the manager, the demat closure was rejected since a signature mis-match was flagged by the bank’s automated process. The customer was forced to visit to the bank again for resubmission. It transpires that the bank does not trust its 6,000-odd branch managers to have a final say on signature verification for fear of fraud. But signing is a physical act and signatures change with age and physical condition—machines cannot decide and unleash harassment either. Moreover, for many decades, public sector branch managers have been entrusted with signature verification during a personal visit to the bank. So accepting bankers as notaries may not be an easy proposition.
A high-powered group at the finance ministry or NITI Aayog with a time-bound mandate to set the rules and processes and ensure that these are implemented by all regulators is the ideal way forward. But we will need to build public pressure to get the policy-makers to perceive and recognise the problem.
We request readers who have had a tough time getting their money as nominees to write to [email protected] with details. We intend to take this issue forward and actual experiences and case studies would be of great help. You can request that your name is not to be revealed, if you so desire. — Sucheta Dalal
3 years ago
This is a very relevant post. When a relative passed away recently, even though his sister was a joint account holder on an FD, she had to sign an indemnity to liquidate an FD. And, though his nominee for another account where the deceased was a single holder was clearly known and identified (with PAN and Aadhaar), that person also had to sign an indemnity to have the funds released to him.

What is funny is that even supposedly experienced people like auditors don't seem to understand the difference between legal heirs and nominees. One auditor told me that the nominee has absolute ownership of the assets, even if the nominee is not the legal heir. I had to dig out the relevant articles from multiple online sites and help rectify his (mis)understanding.

Every bank has slightly different rules about the documentation required which complicates matters for people who have widely diversified assets. Bond issuers and life insurance/annuity companies are no better.

Further, assets like properties do not have the concept of nomination, and require proof of legal heirship issued by a tashildar's office. That is obviously a way for said officials to make money - the moment you approach them for a certificate, they know that properties worth many lakhs or crores of rupees must be involved, and they start imposing requirements that are clearly intended to be a way for them to collect a hefty bribe to issue said certificates.
Kamal Garg
Replied to SRS comment 3 years ago
Mostly all banks' rules are same. Only the implementation is different because every rule and internal rule book/memos specify that the manager concerned has to satisfy about the bona fides of the heir/nominee. And in this era of CAG, ED and CBI, no body wants to take any risk of any nature, whatsoever, and therefore, insists upon as many papers as possible to save their skin.
3 years ago
The communication styles from RBI to banks and those in turn to its operating units need simplification. There is an age old practice among banks to refer to an old or original or a subsequent one and will end with a protective clause that refers to a vague reference to communications on the topic.

Instead of making it complex to understand and implement, RBI/ any other competent body can say directly that all banks to follow the procedure uniformly duly stating the situations and documents to be obtained there for.
3 years ago
Yes ma. You are right so far as highlighting the problems. As a retired senior officer of a leading Bank, while on the one hand I fully understand the pains of the depositors, on the other hand the available legal support system to quickly settle the assets of the deceased , to say the least, is unfriendly. Even if a small mistake is made by the official in his anxiety to settle the matter fast, , it will be made big, thanks to portal like yours, alleging all conceivable motives. Therefore, official at Branch/Zonal levels like to save their backs and play safe by asking for all types of indemnities, affidavits etc while settling accounts of the deceased depositors. To me it appears that the Government should think proactively and remove the distinction of moveable and immovable asset in regard to a value of say Rs 2 crores of a deceased person, allow automatic succession in cases where the successor had predeceased the depositor and he /she not able to make alterations due to various reasons. Therefore, to me the problem is a serious one but not receiving attention of law makers/Supreme Court. My personal view is that a public interest litigation should be filed in the SC in the matter. I am ready to volunteer to follow up/provide sufficient materials if such an action is taken by you.
avinash s phatak
3 years ago
In most of the society matters, the biggest problem is an individual is not aware of his rights as a member. He does not have a copy of the bye-laws adopted by his society. Regarding a will executed at Mumbai in care of the immovable property, one must obtain probate. However, very few people know that in case of an undisputed will, there is no need to engage an advocate to obtain probate. The procedure for obtaining probate is straightforward in such cases being administrative, and it is likely to get it quickly, which saves the advocate fees and time.
3 years ago
A commendable timely article highlighting a real issue of our times. Whilst the issues and probable solutions are well discussed I would suggest that a follow up article is penned clearly highlighting the various steps - in the order of their suitability priority be listed for each class of assets UNDER EXISTING LaWS and circumstances.
A simple Do's and Don'ts list even though they may not solve the issue completely and in all instances will surely help a lot of people who are quite clueless in this important aspect of passing on Assets to their brethren other than the option of a WILL.
3 years ago
A commendable timely article highlighting a real issue of our times. Whilst the issues and probable solutions are well discussed I would suggest that a follow up article is penned clearly highlighting the various steps - in the order of their suitability priority be listed for each class of assets UNDER EXISTING LaWS and circumstances.
A simple Do's and Don'ts list even though they may not solve the issue completely and in all instances will surely help a lot of people who are quite clueless in this important aspect of passing on Assets to their brethren other than the option of a WILL.
3 years ago
Many of us are not clear if nominee is needed in joint holding accounts in the banks or other organizations. In joint accounts if some mishap occurs with one, the second individual becomes responsible to handle the matter
3 years ago
I have another issue related to succession to share. I invested in couple of mutual funds in my Minor son's name. Incidentally, all mutual funds managed by CAMS allowed me to have Joint Holders but two funds (Mirae and Quantum) managed by Karvy did not allow me to have Joint Holders. When my son turned Major, with CAMS managed funds, I submitted necessary documents and the holding remained same with Son as First Holders and Joint Holders and now I also appointed a Nominee. Since Quantum and Mirae had not allowed Joint Holders, when my son turned Major, I wrote to them to allow to add Joint Holders. Quantum readily allowed me to add Joint Holders (and I appointed a Nominee too), BUT Mirae Asset refused to allow me citing 'compliance team does not allow'. Thus Mirae Asset 1) is depriving an investor to have Joint Holders when investor is a Minor as well as when turning Major. 2) This way they are discouraging people to invest in their Minor children name. So please be aware of this issue when you invest with Mirae Asset in a Minor's name. When I drew the attention that other funds allowed me to hold Joint Holders with Minor, they said 'because they are all managed by CAMS'. Does that mean that it is the Registrar's call to allow/disallow Joint holding with Minor ? The pattern surely indicates that (Quantum and Mirae). How can a Registrar make the rules ? This issue remains unresolved till date and my fight with Mirae Asset continues.
3 years ago
Real estate transfer to Nomination is also a critical issue. Specially in societies and apartment associations. The societies do it at their will and must make a water tight procedure with time limit. Even the administrators behave at their will. For example: First owner expired society . The family continued staying in the flat but was not aware that the flat is not transferred to nominee. Due to old age the nominee also expired after 25 years. Now the question came to register flat to children. The legal heirs had to apply to HC as advised by Society and advocate. It took about 1 year & got administrator order and not a succession order? for that 1.5 lakh Rs were spent in legal process. At the same time noted that a relative procured Succession certificate in Rs 500 from Revenue Department at Taluka place . In some societies such transfer are done without any further document but based on nomination already filled by the owner. So the process need to transparent and clear and should not depend on someones will.
3 years ago
A very important issue has been raised and made aware to the people. I have noticed one anomaly which is important. In (savings) bank accounts (at least in my bank KOTAK) I am allowed to nominate only one person unlike in Demat, Mutual Funds, etc. where one can nominate upto three. So is this restriction of one Nominee is only by Kotak or is it followed by all banks ? Is it the RBI rule ? If so, time to change and allow more nominees.
3 years ago
Superb article Madam...well narrated..all these stem from British era mindset. It took 150 years to remove criminality from adultery. Reason, one speaker told that in 19th century, both husband and wife need to work. If wife goes with someone, it deprives earnings to husband and his parents, so it was made as criminal offence...that is the reason, we don't have nomination in fixed assets. Complete overhaul of succession act required making common nomination mandates across all assets..
Ch Ravi
3 years ago
Wonderful article madam.
When I joined my job, I opened a bank account with ICICI bank and gave my Dad\'s name as nominee and know nothing about stock market. one day, a person from ICICI bank called me and said he need my PAN card and few signatures in a form from me. He gave me ICICIDIRECT kit. I did nothing for 1 year and forgot about this. After one year, I checked my bank statement and saw AMC debited from my bank account for icicidirect account. After 3 years, I came to know about stocks and mutual funds. I invested some money in stocks and mutual funds. I recently saw a video about the importance of Nominee in demat account.I receive CAS statement every month and there it is given as no nominee is registered for icicidirect account. So I wanted to check whose name is given in demat account. There is no online procedure to check. But ICICI uploaded the scanned applications that I have signed 9 years ago. That application is filled by the icicidirect agent and he checked the option \"I/We do not want to nominate any person\". he never called me or copied my dad name from bank application. Just a few days ago, downloaded a demat nominee form and written the name and submitted. It has been almost month I sent the form to them. so far no updates. ICICIdirect gave the option to update trading account nominee online but no option is given whose name is given in nominee. Currently, if I want to open a bank/demat account, I no need to visit bank or brokers, everything will be done online. but updating a nominee option online isn\'t given. And depository NSDL which holds 300 lakh crores of demat assets has a pathetic and rubbish website and can\'t allow the nominee update online or can\'t check whose name is there. Indians have a long way to go to resolve these nomination issues.
Replied to Ch Ravi comment 3 years ago
I completely understand this. ICICI Bank certainly had faulty systems. I remember that in my case, when I am completely paranoid about ensuring nominations is filled out, the nominee name on my fixed deposits would vanish with every renewal and lead to a fight and effort to put it back -- it happened because I was diligent about checking this (90% of the people would not have checked at each renewal). Finally I escalated it to Chanda Kochhar -- she saw the point and over time their central systems now ensure that the nominees is permanent -- In my case it works because I do not have multiple nominees, successive nominees etc. We need a SOP to ensure this happens! w regards Sucheta
Kamal Garg
3 years ago
I think the problem is multi-fold :
(1) We do not want to write a clear "will" during our lifetime in the impression that a clear "will" will alienate some children with others making the person's life more miserable and contentious in the old days. While this may be true to some extent, but, to leave your children in eternal conflict is also not a good idea to live life and leave your life also.
(2) RBI has to be fully blamed for such lousy directions like : "the imperative need to avoid inconvenience and undue hardship to the common person" and "half-hearted instructions allowing banks to use their discretion rather than issuing standard operating procedures". Why Rules and Acts itself cannot be suitably amended to incorporate what is written in circulars and directives.
(3) It is indeed a good idea to legally treat "nominee" and "legal and beneficial owner" as one and the same person.
(4) Banks and all financial institutions including DPs should take the confirmed and proved identity of the "nominee" (like Aadhaar copy and PAN copy of the nominee, etc.) at the time of filling up the Form itself rather than simply writing the name and relationship of the nominee in the Form. This will avoid and clear any confusion regarding the identity of the nominee at the later stage.
Replied to Kamal Garg comment 3 years ago
A clear WILL is good to make, but is no guarantee to avoid conflict after death as a WILL can be contested. So one more step to avoid conflict is to Register the WILL also which makes it difficult to challenge. But for someone who may want or need to change the WILL more than once, registering each time can be challenging. But yes, a WILL should be made by all to avoid/minimize conflicts and hardship for the survivors.
Replied to Kamal Garg comment 3 years ago
Sir, you may have noticed that even a CLEAR Will that is uncontested has a long time frame for resolution, as mentioned in the article.
3 years ago
Superb article and thoughts.Some CA's also specialise in forging signatures of dead clients etc if the client didnot have a son and such fraud so what you are saying is all the more necessary.
Replied to suketu comment 3 years ago
This is a serious worry in India, even with Trustees and executors. Our tolerance for corruption is so high, this is a natural consequence of it, but we think it will not affect us, hence we tolerate corruption and mis-selling!
3 years ago
The article is timely but does not help resolving the issue. I am a joint owner of SBI SB account along with my late mother. But the bank would not transfer the leftout funds of around Rs 12000/= in this account to me. Instead it is asking for parading the four legal heirs (all senior citizens located in different parts of the country) along with two witnesses. Dont know what is the RBI guide lines in this regard.
Replied to jeswar50 comment 3 years ago
This exact issue has been discussed in the article with links to two RBI circulars. It would be good if you read it and took help in writing to SBI in the complaint section. You can also make the effort to discover Moneylife Foundation . Link is in the masthead above.
Replied to sucheta comment 3 years ago
Either or survivor or any one or survivor may be made a default option and mandatory joint operation may have to be made specifically at the instance of the depositors . In online opening , the relevant advantages of e or s can be highlighted . There are instances where there were frauds in e or s accounts and the branches were drawn into controversies. When a banker faces trouble , there is no support system to his rescue including his own organisation . He is the one who gets battered for the right or wrong reason. While dereliction of a banker is not pardonable , one should look at this eco system also which discourages a branch person to take any risky decision . We do not pull up a government so much because of the fear of reprisal.
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