Nomination, Legal Heirs and Deposit Insurance After a Depositor's Death
A district central cooperative bank branch has a savings account in the name of Mohan Lal, a farmer, with a balance of Rs 7,40,000. The account was opened nine years ago at the same branch and carries a registered nomination in favour of his son Rakesh. Mohan Lal dies without a will. His daughter Meena submits a legal heir certificate listing Mohan's widow Sunita, Rakesh and Meena, and demands half the balance. Rakesh demands the entire amount as nominee. Sunita wants the money retained for family use. There is no joint holder. KYC records are complete, and no one disputes that Mohan Lal signed the nomination. The bank is DICGC-insured. The branch manager must decide how much deposit insurance cover applies, whether the bank should pay Rakesh or Meena, and what documents and safeguards are needed before payment.
1. How much DICGC cover applies to this account, and does the Rs 7,40,000 balance become fully insured because a nomination exists?
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DICGC cover is Rs 5 lakh per depositor per bank, not per account and not per nominee. A nomination does not create a second insured deposit or increase the cover.
- Balance: Rs 7,40,000.
- Insured portion: Rs 5,00,000.
- Uninsured portion: Rs 2,40,000.
The branch must not tell the heirs that only Rs 5 lakh is payable. The bank remains liable for the full Rs 7,40,000 to the depositor's estate. DICGC insurance matters only if the bank fails; then DICGC reimburses up to Rs 5 lakh and the excess claim ranks against the bank. So the correct statement is: the deposit is insured up to Rs 5 lakh, but the bank's payment obligation is Rs 7.40 lakh.
2. Who is entitled to receive the balance: Rakesh as nominee, Meena as legal heir, or both? What is the bank's safe course?
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A nominee is not automatically the owner of the money. The nominee receives the deposit as a trustee for the legal heirs. The bank's mandate is to pay the nominee against a proper discharge, but Meena's claim means the branch should not treat the matter as finally settled between the heirs.
Safe course:
- Verify the death certificate, nomination record and KYC of Rakesh.
- Record Meena's written objection and give her a receipt.
- Pay Rakesh as nominee only after taking a signed indemnity and undertaking that he will hold the amount for the legal heirs and indemnify the bank against claims.
- If Rakesh and Meena do not cooperate, retain the amount and ask them to produce a succession certificate or a written settlement; do not adjudicate ownership at branch level.
Paying Meena directly as a legal heir, ignoring a valid nomination, is riskier because the bank would lose the statutory discharge available on nominee payment.
3. List the documents and safeguards the branch should obtain before releasing the amount.
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Documents and safeguards:
- Original or verified death certificate.
- Claim form signed by the nominee.
- KYC and identity verification of Rakesh and, for the record, of Meena.
- Copy of the registered nomination; if not traceable, the account-opening record.
- Legal heir certificate or family detail submitted by Meena, marked as disputed.
- Indemnity and undertaking from Rakesh as nominee.
- Written acknowledgement from Meena that she has been informed of nominee payment and that her claim is against the nominee/estate.
- Maker-checker approval and entry in the branch claim register.
- No payment in cash without proper identification; use account transfer where possible.