Published Dec 12, 2024

Navigating the new nomination rules: how recent changes affect your dormant bank account

Learn how recent changes in nomination rules affect dormant bank accounts.

Changes in Indian banking appear to never end. Therefore, the occupants of bank accounts should keenly realize changes and alterations to prevailing laws. Indeed, this particular banking legislation has lately modified portions of it, which affects control concerning your bank account directly particularly in nominations and dormant account control. ClearClaim had been keeping you updated by receiving updates and directions through these. Let us now look at the effects for individuals and the impact this new regulation has on the recovery of funds from dormant bank accounts.

Understanding the New Rules of Nomination:

The Lok Sabha has passed the Banking Laws (Amendment) Bill, 2024, which introduces reforms that modernize banking operations and strengthen account management. One of the most prominent changes is the alteration of nomination rules for bank accounts.

Key Changes in Nomination Rules for Bank Accounts

Multiple Nominations: Account holders can now nominate up to four individuals for their bank accounts, a significant increase from the previous limit of one.

Nomination Types:

Successive Nomination:Nominees are prioritized in order.

Simultaneous Nomination:All nominees have equal rights to the account proceeds.

Flexibility:Account holders can choose between successive and simultaneous nominations based on their preferences and family circumstances.

Regular Updates:Banks are now required to send periodic reminders to account holders to review and update their nominations.

Impact on Dormant Bank Accounts

While these new nomination rules are a positive step towards better account management, it’s crucial to understand what happens when accounts become dormant and funds remain unclaimed.

What is a Dormant Bank Account?

A bank account is typically classified as dormant if there have been no transactions for a continuous period of two years.

The Journey of Unclaimed Funds begins with the Dormant Stage: After two years of inactivity, the account is classified as dormant.

The subsequent stage is the Unclaimed Stage:If the account remains inactive for ten years, the funds are classified as “unclaimed.”

Following this, Transfer to DEAF: After ten years of inactivity, unclaimed funds are transferred to the Depositor Education and Awareness Fund (DEAF), which is maintained by the Reserve Bank of India (RBI). Understanding DEAF (Depositor Education and Awareness Fund) is important; the DEAF is distinct from the Investor Education and Protection Fund (IEPF).

Here’s what you need to know:

Purpose: DEAF was established to enable depositor awareness and protect the rights of the depositors.

Origin of Funds:These include unused funds from accounts that were inactive, including savings accounts, current account, as well as fixed deposit accounts.If the account remains inactive for ten years, the funds are classified as “unclaimed.”

Claims: The DEAF claims do not get processed like those of the IEPF claims. These are dealt with through the original bank account holders.

Step-by-Step Guide: How to deal with Dormant Account Recovery or Reclaim Amount Transferred to DEAF Do you have unclaimed amount in an inactive account or some amount has been credited to DEAF?

Know how you can recover these:

Active Your Inactive Account

dentify your inactive accounts: Check the accounts held with those banks you had operated previously. Check the RBI’s UDGAM portal for finding all the dormant deposits of your banks Collect all documents You must have all such proofs and documents to demonstrate your identity, residence and the originals of your account holders in case you had any legal heir certificate if account holder expired

Visit Bank: You need to visit your account bank branch and need to get the required application forms which will be asked by your bank for making the application for the same.

You need to submit an application that you are claiming these funds even though it had been credited to DEAF Procedure if the bank has already received funds through DEAF Bank will accept your claim and then after the claim verification process will take over the action to collect this amount on your behalf.

Now, track these applications in the provided reference number at the end and also expect to submit further evidence in case of requirements.

Suggest Tips for Managing Active Bank Account

Active Banking Regular Transaction Perform at least one transaction of your account in at least in a year basis. Nominations Update Your nomination records regularly especially after taking some important decisions of life. Maintain Active Contact information: Make sure your banks have the address, mobile number, email, as well as the latest contacts of all your bank account holder. Online Banking and Mobile: Take advantages of online banking and mobile banking as it is very helpful to view all the data related to your accounts, so now you do not need to visit banks multiple times and can access from your system. Close Obsolete accounts: Consider closing unrequired bank accounts. Under the New Rules: Nomination of a Bank Account: Increased Awareness Among Account Holders about a Dormant Account, Some Implications Dormant Account Holder Flexibility in Succession of accounts. Although they do not impact the IEPF claims regarding shares and dividends, these are a prerequisite in averting the account from dormancy and in the avoidance of fund transfers to the DEAF.