What changed
RBI reinforced earlier 2005 guidance on nomination for single deposit accounts at UCBs. Banks must now insist on nomination, explain benefits if declined, and obtain a specific letter of refusal. If no letter is given, banks must record the fact and proceed with account opening.
What it means for you
UCBs must tighten account opening procedures to ensure nomination is actively pursued. This reduces legal disputes for depositors' families and aligns with court observations. Banks cannot deny service, but must document non-compliance carefully.
What you must do
- Update account opening forms to include a clear nomination section and refusal letter template.
- Train staff to explain nomination benefits and survivorship clause to all single account applicants.
- Implement a process to record refusal in account opening form if applicant declines both nomination and refusal letter.
- Ensure no account is rejected solely due to non-nomination; document all steps.
- Extend same procedure to sole proprietary concern accounts.
Who it affects
Primary (Urban) Cooperative Banks, Deposit account holders with single accounts, Sole proprietary concern account holders
Can a UCB refuse to open a single 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 applicant refused to nominate.
What should a UCB do if a customer declines nomination?
The bank must explain the benefits of nomination. If the customer still refuses, the bank should ask for a specific letter stating the refusal. If the customer also refuses to give that letter, the bank must record the fact on the account opening form and proceed.
Does this circular apply to sole proprietary concerns?
Yes. The procedure outlined for single deposit accounts also applies to deposit accounts in the name of a sole proprietary concern.