What changed
Earlier, banks were only advised to publicize nomination benefits. Now, following an Allahabad High Court observation, RBI directs banks to generally insist on nomination for single savings and fixed deposit accounts. If declined, banks must get a specific letter or record the refusal.
What it means for you
Banks must proactively push nomination to protect depositors' families from legal hassles. This reduces claim disputes and litigation costs for banks. However, banks cannot deny account opening solely for lack of nomination, balancing customer rights with risk mitigation.
What you must do
- Update account opening forms to include a mandatory nomination section and a declination letter template.
- Train branch staff to explain nomination benefits to every single-account holder and handle declinations uniformly.
- Ensure no account is refused solely for lack of nomination; record refusal on the form if customer declines both nomination and declination letter.
- Extend the same procedure to sole proprietary concern deposit accounts as per earlier circulars.
Who it affects
All scheduled commercial banks (excluding RRBs), Branch managers and account opening staff, Single deposit account holders (savings and fixed deposits), Sole proprietorship firms with deposit accounts
Can we refuse to open an account if the customer refuses nomination?
No. RBI explicitly states that under no circumstances should a bank refuse to open an account solely because the customer refuses to nominate. You must explain benefits, ask for a declination letter, and if still refused, record the fact on the form.
Does this apply to joint accounts or only single accounts?
This circular specifically addresses single deposit accounts. For joint accounts, nomination rules are covered under separate RBI guidelines. However, the principle of encouraging nomination applies broadly.
What if a customer declines to give a declination letter?
If the customer refuses both nomination and a declination letter, the bank should record this fact on the account opening form and proceed with opening the account if otherwise eligible.