Bank account nominee dies before the holder? Know what happens to the money

A nominee is appointed to make it easier for a banking institution to release funds after the primary account holder’s demise. Such a step helps in avoiding delays and legal complications later on.

Still, another critical aspect that warrants due consideration is what happens if the nominee dies before the account holder? How will the funds be treated in such cases? What are the different possibilities?

The answer to the above questions depends on whether the account has a single, simultaneous or successive nomination. Let us discuss all the different types of cases in detail.

What happens to the nominee’s share?

In accordance with the Banking Laws (Amendment) Act, 2025 and the Banking Companies (Nomination) Rules, 2025, effective from 1 November 2025, an eligible bank depositor can nominate up to four individuals for a bank deposit. Furthermore, such a nomination can be ‘simultaneous’, where every nominee gets a specified percentage, or ‘successive’, where nominees are placed in a specific order.

Now, if a successive nominee dies before the primary account holder or the depositor, the next nominee in the specified order will become effective. This will ensure that the nomination continues without requiring a fresh nomination merely because the earlier nominee is no more.

Section 45ZG and successive nomination

Section 45ZG of the Banking Regulation Act, 1949, deals with successive nominations for bank deposits. It provides that where nominees are named in a specified order, a subsequent nominee becomes effective when the nominee placed ahead of them dies before the depositor. Therefore, the next nominee does not automatically receive the money merely because the first nominee dies; the order specified in the nomination determines who becomes effective.