Nomination
Nomination in finance refers to the process by which an account holder, investor, or policyholder designates one or more persons to receive the assets or proceeds of a financial account, investment, or insurance policy in the event of the holder's death.
Nomination was one of the most basic yet critically important administrative tasks in personal finance, yet surveys repeatedly showed that a large proportion of Indian investors had not completed nominations across all their financial accounts. The absence of a valid nomination could result in significant delays — sometimes years — in transferring assets to family members after a death, with the estate required to go through a formal legal succession process.
In India, the nomination facility was available across virtually all financial instruments: bank savings accounts and fixed deposits, demat accounts, mutual fund folios, PPF accounts, EPF accounts, NPS accounts, and insurance policies. The rules governing nomination differed somewhat across instrument types. For bank deposits, the nominee received the funds in a custodial capacity — meaning that if there was a legal heir with a superior claim under succession law, the nominee was obligated to pass the funds to the rightful heir. For mutual fund units and insurance policies, the treatment of nominees varied, with insurance having a more protective framework for nominees under the Insurance Laws (Amendment) Act 2015.
Amending or updating a nomination was just as important as the initial registration. A common oversight was failing to update nominations after significant life events: the death of a previously named nominee, a divorce, the birth of a child, or a remarriage. An outdated nomination pointing to a deceased or no-longer-appropriate person could create the same complications as having no nomination at all.
For joint accounts, banks required the account holders to nominate and also clarify the joint operation mandate — either-or-survivor or former-or-survivor — which determined who could operate the account and who inherited the proceeds. These distinctions mattered enormously for estate planning and for ensuring smooth transfer of assets to intended beneficiaries.
SEBI mandated through a 2022 circular that demat account holders and mutual fund investors had to either register a nomination or opt out explicitly by a specified deadline. This regulatory push brought significant attention to the nomination gap and prompted millions of investors to complete or update their nomination records across financial platforms.