Most of us open a fixed deposit to build a safety net for our family, fund our child’s education, or preserve savings for the future. But one question often goes unaddressed when making this investment.
“If something were to happen to you, who would actually receive this money, and how smoothly would it reach them?”
To ensure that your funds reach your family without complications, it is crucial to nominate a beneficiary. By doing so, you help ensure that your Fixed Deposit proceeds are transferred to the right person.
In this blog, we explain what the nomination facility in fixed deposits means, why it matters, and how you can add, change, or update a nominee with ease.
What is a Nomination Facility in a Fixed Deposit?
Nomination is a simple process that involves designating a trustworthy individual, usually a family member, to receive the funds if you pass away. According to RBI regulations, this service is offered by all banks and ensures that your savings don’t get caught up in paperwork or conflicts and instead reach your loved ones without incident.
Now that we know what the nomination facility is and how it works, the real question is why this simple step is so important to FD holders and their families.
Importance of FD Nomination
Nominating your beneficiary for your FD investment is a thoughtful step that protects your family’s financial well-being. Here’s why it matters:
- Smooth transfer of money: Your FD amount can be transferred to your nominee without them having to produce a succession certificate or probate of a will.
- Protects your intentions: Nomination protects your financial legacy by ensuring that your savings reach the person you genuinely want to benefit from them.
- Reduces stress during tough times: Your family can obtain funds more easily through nomination without having to navigate drawn-out legal processes.
- Prevents family disputes: The likelihood of disputes or miscommunications among family members is decreased by clearly stating who should receive the FD.
- Peace of mind for you: Most importantly, having a nominee ensures that your hard-earned money will be used for the desired purpose and won’t be lost.
While the advantages of FD nomination are clear, it is equally important to understand the legal framework and rules that govern how nominations work in India.
Fixed Deposit Nomination Rules
The nomination process for fixed deposits is governed by Sections 45ZA to 45ZF of the Banking Regulation Act, 1949, along with RBI guidelines. Key points to keep in mind include:
- Legal backing: A nomination has complete legal validity because it is recognized by the Banking Regulation Act.
- Number of nominees: You can appoint up to four nominees, with a specified percentage of shares.
- Minor as nominee: Nominee for a minor must have an appointed adult to receive the funds.
- Registration: The nomination and any modifications (cancellation or variation) must be documented in the bank’s official records.
- Flexibility: During the FD’s term, nominations may be added, modified, or withdrawn at any time.
- Acknowledgement: Banks are required to acknowledge the nomination in writing and, if the customer agrees, indicate the name of the nominee on the FD receipt or passbook.
- Claim settlement: RBI mandate requires banks to settle claims within 15 days from the date of receipt of the claim, provided all necessary documents are submitted.
Once you are aware of the rules and conditions around FD nomination, the next step is knowing how to actually put this facility in place without complications.
Step-by-Step FD Nomination Process
Adding a nominee to your FD is a straightforward task. Here’s how it usually works:
Step 1: Access the nomination facility
You can choose to add a nominee when you create an FD, either digitally on platforms that facilitate easy online submissions or on a FormDA1 at the branch.
Step 2: Fill in nominee details
Give basic information such as the nominee’s full name, date of birth, and relationship with you. Include a guardian if the nominee is a minor.
Step 3: Verify and submit the form
Verify all the information once again, then submit the form. While using digital platforms, you will typically receive an instant confirmation as soon as your information is saved.
Step 4: Get acknowledgement
The registered nomination must be acknowledged by banks and platforms. For instance, “nomination registered” can be written on passbooks or receipts, or it might appear on your investment dashboard on digital platforms.
Step 5: Update when circumstances change
A new nominee may be required due to life events like marriage or having children. To keep it up to date, simply submit an update through your bank or platform.
Life circumstances change, and so might your choice of nominee. That makes it equally important to understand how an existing FD nomination can be changed or updated when needed.
How to Change or Update the FD Nominee
The procedure for changing your FD nominee is simple, but it needs to be done carefully to prevent delays later. Whether you own an FD at a bank or through digital platforms, the RBI has explicit regulations under the Banking Regulation Act.
- Obtain the correct form
- DA1: to make a nomination for the first time
- DA2: for cancellation of an existing nomination
- DA3: for changing/adding a new nominee (variation)
These can be found online or at bank branches.
- Fill in complete details
Enter the nominee’s full name, date of birth (if minor), relationship, and address. You must also designate an adult who is able to accept the funds on the nominee’s behalf if they are a minor.
- Submit with supporting documents
Hand over the filled form at your branch or upload it digitally. Banks may require a self-attested ID copy of the depositor(s) for verification.
- Get acknowledgment of change
After the nomination is revised, banks must provide a written or stamped acknowledgment. On the FD receipt or passbook, some people additionally write “nomination registered/updated.
(Note: You can also nominate 4 people and list them in order of priority.)
With the nomination in place, let’s look at the legal process that kicks in when the FD needs to be claimed
Legal Aspects & Claim Settlement Process
In India, FD nominations are subject to RBI regulations. Within this framework, banks can release funds to the registered nominee or nominees. Here are the legal aspects of the claim process you should be aware of.
Legal Aspects
- A single FD can now have up to four nominees, with clearly defined percentage shares.
- Any request for a change, cancellation, or nomination in a joint deposit requires the signatures of all account holders.
- An adult guardian must be designated to receive money until the nominee turns 18 if they are a minor.
- A formal acknowledgement of nomination or revisions (passbook/FD receipt entry or digital confirmation) must be provided by the bank.
Note: A nominee is not the sole owner of the funds; they are merely a trustee for the legal heirs. Depositors should also create an estate plan or will to prevent disagreements.
These legal principles come into play during the actual claim process.
Claim Settlement Process
- Inform the bank or platform of the depositor’s passing
- Send in the necessary paperwork, including a claim form, the nominee’s identification, and the death certificate
- The bank confirms the nominee’s registration and details
- Settlement within 15 days of valid claim submission, as per RBI mandate
- Without a nominee, the bank will release funds only after legal heirs provide proof, such as a Succession Certificate or Letter of Administration, depending on the amount and bank policy, or a court order.
A clearly recorded nomination turns what could be an uncertain, document-heavy process into a defined administrative procedure, giving banks clarity on whom to release the funds at a sensitive time.
Conclusion
Nomination is not about inheritance planning; it is about operational clarity at a critical moment. Banks do not evaluate family relationships or intentions—they act strictly on recorded instructions. A properly updated FD nomination ensures that your deposit moves through a defined banking process instead of getting stuck in verification loops.
