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The Indian banking sector is witnessing a transformative shift in depositor rights and nomination facilities with the enforcement of key provisions of the Banking Laws (Amendment) Act, 2025 from November 1, 2025. Through a notification issued by the Ministry of Finance on October 23, 2025, the Central Government has brought into force four critical sections—Sections 10, 11, 12, and 13—that fundamentally reshape how depositors can nominate beneficiaries for their bank accounts, lockers, and safe custody articles.
Read Said notification here: Click here.
The Legislative Framework
The Banking
Laws (Amendment) Act, 2025, which received Presidential assent on April 15,
2025, introduces 19 amendments across five major banking legislations: the
Reserve Bank of India Act, 1934; the Banking Regulation Act, 1949; the State
Bank of India Act, 1955; and the Banking Companies (Acquisition and Transfer of
Undertakings) Acts of 1970 and 1980. While certain provisions of this
Act came into force on August 1, 2025, the nomination-related provisions have
been specifically designated for enforcement from November 1, 2025.
The overarching
objective of these amendments is to strengthen governance standards in the
banking sector, ensure uniformity in reporting by banks to the Reserve Bank of
India, enhance depositor and investor protection, improve audit quality in
public sector banks, and promote customer convenience through improved
nomination facilities.
Game-Changing
Provisions: From One to Four Nominees
Amendment to
Section 45ZA: Nominations for Deposit Accounts
Section 10 of the 2025 Amending Act
introduces a paradigm shift in deposit account nominations by amending Section
45ZA of the Banking Regulation Act, 1949. Previously, a depositor
could nominate only one person to receive the deposit amount upon
death. The new provision substitutes this with the power to nominate “one
or more persons not exceeding four, either successively or simultaneously”.
This
amendment introduces two new sub-sections that provide unprecedented
flexibility:
Section 45ZA(1A) addresses successive
nominations, providing that when nominations are made successively, only one
nominee shall be recognized at a time, following the priority set out in the
newly inserted Section 45ZG.
Section 45ZA(1B) permits simultaneous
nominations in favor of up to four persons, subject to specific conditions: not
more than four nominees can be designated; the depositor must specify the
percentage share of each nominee; the shares must cover the entire deposit amount
totaling 100%; and if any nominee dies before receiving payment, that portion
is treated as having no nomination. Non-compliance with these conditions
renders the nomination invalid.
Amendment to
Section 45ZC: Safe Custody Articles
Section 11 of the Amending Act modifies
Section 45ZC of the 1949 Act, which governs articles left in safe custody with
banking companies. Earlier, a person could nominate only one person
to receive articles in safe custody upon death. The amendment now allows
nomination of “one or more persons not exceeding four, successively”.
Notably, for safe custody articles, only successive nominations are
permitted—simultaneous nominations are not available.
Amendment to
Section 45ZE: Bank Locker Facilities
Section 12 introduces the most
comprehensive change by amending Section 45ZE(1), which deals with access to
bank lockers. The pre-amendment provision allowed only an individual
sole hirer to nominate one person for locker access upon death. The new provision
dramatically expands this scope by enacting:
“Where one or more individuals hire a locker from a banking company, whether such locker is located in the safe deposit vault of such banking company or elsewhere, the individual or, as the case may be, all the individuals together, may nominate one or more persons not exceeding four, successively, to whom, in the event of the death of the sole hirer or the death of all the hirers, the banking company may give access to the locker and liberty to remove the contents of the locker.”
Similar
to safe custody articles, only successive nominations are allowed for
lockers.
Insertion of
Section 45ZG: Priority of Successive Nominees
Section 13 inserts a new Section 45ZG in
the Banking Regulation Act, 1949, which establishes the legal framework for
determining priority among successive nominees. This section
prescribes that where a person makes successive nominations under Sections 45ZA(1),
45ZC(1), or 45ZE(1), the nomination takes effect only in favor of one person
according to a specific priority order.
The
priority mechanism operates as follows: the first nominee’s nomination shall be
effective if they survive the depositor or hirer; if the first nominee has
died, the second nominee’s nomination becomes effective; this sequence
continues such that each subsequent nominee’s nomination becomes effective only
after the death of all nominees placed higher in the order.
Sub-section (2) of Section 45ZG provides
a default rule: if the order of priority is not specified by the depositor, the
nominees will be treated as nominated in the sequence in which their names
appear in the nomination form. However, sub-section (3) clarifies
that these priority provisions do not apply to simultaneous nominations
made under Section 45ZA(1), as those operate on a percentage-share
basis.
Practical
Implications for Depositors
Flexibility in Estate
Planning
The
amendments provide depositors with significantly enhanced flexibility in
succession planning. For deposit accounts, individuals can now choose
between two distinct nomination strategies based on their family circumstances
and preferences.
Simultaneous
nomination allows up to four nominees with clearly
specified percentage shares, ensuring transparent and predetermined
distribution of funds. For example, a depositor could allocate 40% to
a spouse, 30% to a son, 20% to a daughter, and 10% to a charitable
organization, ensuring that all percentages total exactly 100%.
Successive
nomination provides for contingency planning, where
the next nominee becomes operative only upon the death of the earlier
nominee. This is particularly useful for long-term deposits or
situations where depositors want to ensure a clear line of succession across
generations.
Streamlined Claim Settlement
The
introduction of multiple nominations is expected to significantly reduce delays
in claim settlements and minimize family disputes following the depositor’s
death. By allowing depositors to specify up to four beneficiaries with
clear shares or priority orders, the amendments eliminate ambiguity and provide
banking companies with unequivocal instructions for disbursement.
Uniformity and Transparency
These
provisions will ensure uniformity, transparency, and efficiency in claim
settlement across the banking system. The Ministry of Finance has
indicated that the Banking Companies (Nomination) Rules, 2025 will be
notified to operationalize these provisions consistently across all banks,
specifying the procedure and prescribed forms for making, canceling, or
modifying multiple nominations.
Critical
Distinctions: Deposits vs. Safe Custody and Lockers
A
crucial aspect of these amendments is the differential treatment of deposit
accounts versus safe custody articles and lockers. While deposit
accounts permit both simultaneous and successive nominations, safe
custody articles and bank lockers allow only successive nominations.
This
distinction reflects the different nature of these banking services. Deposit
accounts, being monetary in nature, can be easily divided into percentage
shares among multiple beneficiaries. However, physical articles in safe
custody and locker contents cannot be similarly divided without opening and
distributing the actual contents, making successive nominations—where one
nominee at a time has access—more practical and legally sound.
Legal Considerations and Cautions
While
these amendments provide significant flexibility, depositors must be aware of
certain critical legal requirements:
For
simultaneous nominations under Section 45ZA(1B), strict compliance with
all conditions is mandatory. The nomination must not exceed four persons;
the percentage shares must be clearly specified; the total must equal exactly
100%; and all shares must cover the entire deposit. Non-compliance with
any of these conditions renders the entire nomination invalid.
For
successive nominations, depositors should carefully consider the order of
priority and ensure it reflects their genuine intentions. If no order
is specified, the sequence appearing in the nomination form will be deemed the
priority order.
It is
also important to understand that nomination does not confer ownership
rights; it merely designates who will receive the deposit or access the
locker upon the depositor’s death. The nominee holds such assets in trust
for the legal heirs and must distribute them according to succession laws.
Conclusion: A
Progressive Step Toward Depositor Empowerment
The
enforcement of nomination-related provisions under the Banking Laws (Amendment)
Act, 2025, from November 1, 2025, marks a watershed moment in Indian banking
law. By expanding nomination facilities from one to up to four
nominees and introducing both simultaneous and successive nomination
mechanisms, the legislature has significantly empowered depositors to manage
their estate planning more effectively.
These
reforms address long-standing concerns about procedural delays, family
disputes, and lack of clarity in succession matters relating to bank deposits
and lockers. The amendments promote transparency, reduce litigation, and
align nomination practices with contemporary family structures and succession
planning needs.
As
the banking sector prepares to implement these provisions uniformly through
forthcoming Banking Companies (Nomination) Rules, 2025, depositors would be
well-advised to review their existing nominations and consider whether the new
multiple nomination facilities better serve their succession planning
objectives. Legal practitioners should familiarize themselves with the
nuances of these amendments to provide informed guidance to clients navigating
these new nomination frameworks.
The
Banking Laws (Amendment) Act, 2025, thus represents not merely a technical
legislative update but a substantive expansion of depositor rights—a
progressive step that acknowledges the evolving needs of Indian families while
strengthening the governance and customer-centric orientation of the banking
sector.
Note: Depositors should contact their
respective banks after November 1, 2025, to understand the specific procedures
and forms required for availing of these enhanced nomination facilities once
the Banking Companies (Nomination) Rules, 2025, are notified
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