What changed
Earlier, banks were only advised to publicize nomination benefits. Now, following an Allahabad High Court observation, RBI mandates that banks must insist on nomination for single deposit accounts. If the customer still refuses, banks must obtain a specific letter of declination or record the refusal on the account opening form.
What it means for you
Banks must proactively push nomination to protect depositors' families from legal hassles. This reduces the risk of unclaimed deposits and litigation for lenders. However, banks cannot use nomination refusal as a reason to reject account opening, balancing customer choice with regulatory intent.
What you must do
- Update account opening forms to include a clear nomination section and a declination letter template.
- Train frontline staff to explain nomination benefits and survivorship clause to every single-name depositor.
- Implement a process to record customer's refusal on the account opening form if they decline both nomination and declination letter.
- Extend the same procedure to sole proprietorship concern accounts.
- Acknowledge receipt of this circular to your respective Regional Office.
Who it affects
Regional Rural Banks (RRBs), All single-name deposit account holders, Sole proprietorship concern account holders, Bank branch staff handling account openings
Can a bank refuse to open a single deposit 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 make a nomination.
What should a bank do if a customer declines nomination but also refuses to give a declination letter?
The bank should record the fact of refusal on the account opening form and proceed with opening the account if the customer is otherwise eligible.
Does this rule apply to accounts of sole proprietorship concerns?
Yes. The circular advises banks to follow the same procedure for deposit accounts in the name of sole proprietary concerns.