‘Zindagi ke baad bhi’: COVID and the Worries about Transmission and Succession
COVID’s virulent second wave has had a horrific impact on ‘people like us’ who believed that our social standing, savings and insurance would get us adequate healthcare and protection in a crisis.
 
The virus has shown us the deadly reality. Entire families have been wiped out; young kids had to grow up overnight and take charge of homes and finances.
 
I read one tragic tweet which said just two members of a joint family of 20 have survived the virus!
 
For many, it is a wake-up call to organise one’s finances and provide for the family during emergencies. While doing so, we stumble upon the glaring absence of definitions and standard operating procedures (SOPs) which are a tedious irritant in ordinary times but traumatic in a pandemic. 
 
Many countries have acted to make life easier for people dealing with an unprecedented global emergency.
 
On 12 May 2020, the Australian government enacted legislation to ‘temporarily’ introduce electronic and audio-visual Wills. This is called the COVID-19 Omnibus (Emergency Measures) (Electronic Signing and Witnessing) Regulations 2000. 
 
It is utopian to expect this in India, where the government inflicted untold hardship on the poor and self-employed tiny enterprises by imposing a sudden, hard lock-down that left families without food or livelihood.
 
Nothing will change until educated Indians wake up from their slumber and begin to assert their rights instead of the timid acceptance of financial terrorism unleashed by thoughtless rules framed by multiple regulators.
 
At Moneylife, we succeeded in drawing attention to one key issue recently, but a lot more needs to be done. 
 
On 5th May, Reserve Bank of India (RBI) governor Shaktikanta Das responded to our effort by ordering banks to temporarily stop freezing customer accounts for delays in updating know-your-customer (KYC). 
 
It took another eight days for RBI to amend its master directions to banks to accept video-based KYC as demanded by Moneylife Foundation’s memorandum to the central bank. Many banks refused to unblock accounts in the past week until formal directions were issued by the regulator. 
 
Moneylife Foundation’s memorandum (https://www.mlfoundation.in/memorandum/hardship-and-financial-death-inflicted-on-depositors-due-to-arbitrary-freezing-of-bank-accounts/130.html) pointed out that the lack of SOPs for risk-categorisation or freezing of accounts had unleashed draconian coercive action by banks.
 
The same applies to issues of nomination, succession and transmission with devastating consequences in the second wave. 
 
Consider the facility to register a nominee for your bank accounts, insurance, shares, government savings schemes and apartments in cooperative housing societies.
 
This is basic financial hygiene scrupulously followed by prudent people. The nominee is not a legal heir but is legally given access to assets on production of basic identification documents and a death certificate. 
 
In practice, there are no SOPs for any of these and organisations have been making their own rules. Since grievance redress is abysmal in India, and legal redress slow and expensive, it inflicts untold hardship on people. 
 
Consider how banks handle nomination. Some banks, especially private and foreign ones, have a smooth process and hand over savings account proceeds on production of requisite documents.
 
Others, especially public sector banks (PSBs), make their own rules. R Bhuvaneshwari, a retired manager at Bank of Baroda, discovered these discriminatory practices at the free counselling sessions that she generously conducts at Moneylife Foundation (https://www.mlfoundation.in/ ).
 
One PSB demands a succession certificate/Will or no-objection-certificate with a sign-off by all legal heirs, even when a valid nomination is in place, defeating the very purpose of nomination.
 
A couple of other banks force nominees to lock-in funds received on the death of a senior citizen for three years.
 
This may be a matter of caution in case there is a dispute among heirs, but is legally wrong. Some others demand the submission of a death claim. 
 
RBI’s customer service department can easily resolve the mess by issuing SOPs in consonance with legal requirements; but there is no pressure on the regulator to make life easier for stakeholders.
 
The pandemic is finally forcing people to wake up to these issues.
 
Pune-based Rishabh Talera has written to the prime minister and finance minister on 11th May seeking an amendment to the Banking Regulation Act and other legislations to permit more than one nominee for various movable and liquid assets of individuals, trusts, companies and other entities.
 
This is to addresses situations where the ‘sole’ nominee has also passed away leaving families or businesses without access to legitimate funds. He also wants the government to permit motor vehicles, which are a movable asset, to be held in joint capacities, since the paper work involved in transferring it to a legal heir “is no less than a nightmare.” 
 
Mr Talera’s concerns are genuine, but elimination of red-tape without diluting legal obligations of the owner when a vehicle is involved in an accident or used for unlawful activity requires careful thought. Who is interested in doing it? 
 
Noted Right to Information (RTI) activist Subhash Agarwal has a better solution. He says outdated nomination rules must make way for ‘successive nomination’ for bank accounts and government savings schemes; otherwise money that rightfully belongs to the people ends up in ‘investor education funds’ that have been set up by each financial regulator.
 
As a member of the Investor Education and Protection Fund (IEPF) for six long years, I have seen first-hand the lack of any effort to trace beneficiaries of unclaimed deposits and debentures. Instead, enterprising private firms have begun to comb the data and help recover the money for the heirs by charging 25% to 50% as their fees.
 
The ministry of corporate affairs (MCA), which has set up an IEPF authority, does nothing proactively to help. 
 
Thousands of crores of rupees are similarly transferred to ‘investor funds’ of the Securities and Exchange Board of India (SEBI), RBI and the insurance regulator. It is a national scandal that regulators have no obligation to trace the rightful nominees and can enjoy the proceeds of the money.
 
The amount involved is well over Rs25,000 crore, without including public provident funds and government saving schemes, where the sums are substantially higher.
 
The Union finance minister ought to give an account of this public money in the budget speech every year; instead, there is very little transparency and the money is controlled by bureaucrats.
 
Mr Agarwal had called for a ‘white paper’ on such unclaimed deposits and savings instruments. That would be a good starting point. He also suggests an amendment to Sections 45ZA to 45ZF of the Banking Regulation Act, 1949 and Banking Companies (Nomination) Rules, 1985, to permit successive nominees for bank accounts and lockers.
 
He says that when senior citizen couples correctly nominate one another to these assets and pass away in quick succession, the funds end up in limbo.
 
Since legal process, especially the probate of contested Wills, can take decades, the money is transferred to the Depositor Education and Awareness Fund, set up in 2014. 
 
He says Life Insurance Corporation of India (LIC) already provides for ‘successive nomination’ by filling up Form 5194. This creates a hierarchy of two or more nominees. On the demise of a policyholder, the benefit goes to the first nominee; but if that nominee is also deceased, it automatically goes to the next successive nominee.
 
Incidentally, LIC is the only organisation that has proactively relaxed claims settlement procedures recently by not insisting on municipal death certificate in the pandemic (it accepts death summary containing clear date and time of death issued by Govt/ESI/armed forces/corporate hospitals and counter-signed by LIC class I officers or development officers of 10 years standing, along with cremation/burial certificate or authentic identifying receipt issued by the relevant authority). 
 
Contrast this with Subhash Agrawal’s attempt to take up the issue of successive nominations with RBI last year. Instead of proper application of mind or empathetic consideration, he was sent a bureaucratic reply turning down the suggestion by quoting a bunch of RBI’s outdated rules. 
 
The public provident fund currently permits joint nomination, where the account-holder has to specify the exact share of benefit that will go to each nominee on the death of the account-holder.
 
But, “it is not clear what happens to share of benefit of a nominee when the account-holder as well as one of the nominees or joint nominees is dead,” he says.
 
Similarly, mutual funds permit joint holding and also permit multiple nominees but require the number of units per nominee to be specified at the time of making the nomination.
 
The same is true of  joint accounts with a survivor clause where one additional person can become a rightful beneficiary.
 
In almost every case, the rules for non-resident Indians (NRIs) are nightmarish, although they have retained Indian citizenship and their remittances were once valued by the country.
 
What happens where successive nomination facilities do not exist? Tedious legal process, disputes, the shockingly slow and expensive process of obtaining a probate ends up depriving rightful heirs from accessing the money.
 
Since India is a patriarchal society, families are often clueless about investments by the head of the family and the funds are gobbled up by the giant maw of government ‘unclaimed’ money. 
 
Wills, succession and heirship certificates also need reform and simplification, but people with any savings are considered a privileged class and their concerns are not a priority for anyone in government.
 
Unless we wake up to the need for a concerted campaign for transparency, accountability and sensible regulation, we are destined to live with stifling red tape, losses, delays and friction. 
 
(Please write in with specific suggestions and experiences to [email protected]
 
Comments
naresh.bhatt
3 days ago
Thanks, moneylife magazine for taking up a very very important issue. Can we overcome this problems if we write a will. Please reply. Regards
ar.ravijoshi
4 weeks ago
A very insightful article indeed. I request Money Life Foundation to take up the issue of "Successive Nomination" with all financial Institutions and RBI.
The article is very helpful for making the Will.
Many Thanks.
Rajan Vaswani
4 weeks ago
Nominee is a custodian except in case of demat accounts. Nominations are not final disposition of estate except where no disputes exist. Intestates follow relevant succession laws as applicable to them. Minors with no guardians will come under provisions of Guardian and Wards Act. Minors can be nominees, but require a guardian in nomination form. Choose such guardian wisely as such guardians could dispose minor\'s property. Scam 1992 dialogue most apt.. the most expensive thing in the world is trust.
rajneesh
4 weeks ago
Please compare India with the neighboring countries and enlighten as to why so much suffering here and not in other places
Nairuti Pathak
4 weeks ago
eye opening write up. At least one can prepare WILL with successive nominees
beaumind
4 weeks ago
Several issues here need much more work. Moneylife and its readers can play active roles in bringing these issues into fruition.
suketu
4 weeks ago
This is one of the the best awareness initiatives by moneylife who has highlighted this issue more than all the other press.
gkartikeya2007
4 weeks ago
Good work done by Moneylife on bank KYC issue.
Ramesh Popat
1 month ago
Wherever there is nominee, he/she must be paid without any further
lengthy procedures. It is the essence of nomination. Let further legalities
be between nominee and others, if relevant.

Balraj
Replied to Ramesh Popat comment 4 weeks ago
Recently i took a car insurance policy and with my wife as nominee. After a day, they sent the policy with Beneficiary as my name! ( Missing nominee name, DoB, Address etc...). This PAIN is across the domains ...
raghu.neolife
1 month ago
I have a joint Demat account with Stock Holding Corporation of India., along with my wife. Wefilled the nomination form and appointed my minor children as nominees. For appointing guardian for minors they are insisting on a court order. Mails to Stock Holding customer care goes unanswered. Why should I need a court appointed guardian when we are alive.?
vkjain1973
1 month ago
This is a very timely article. There is a strong need to harmonize nomination and transmission processes for various assets. We should be able to leverage the benefits of Aadhaar and CKYC registry. My another suggestion is that while drafting of common securities act the nomination and transmission processes for shares, government securities and mutual funds can be standardized.
dn.prakash
1 month ago
Nomination forms introduced in 1980s remain archaic requiring too many formalities. RBI has not bothered to look into it. Unless RBI tells Banks will not change it.

Same is the case for settlement of claim of deposit in case of death. Nominee has to produce two witnesses acceptable to the Bank. When Aadhar Identification is done, there is no need to have such requirements. It can be simplified by by crediting to nominee's account which has Aadhar seeding. But who will bell the cat?
narayansa
1 month ago
Congratulations to Moneylife on the successful outcome of its petition on the KYC issue, from RBI. Kudos to LIC on its successive nominations practice; perhaps a similar model needs to be followed by banks, MFs and other financial entities.
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