- Nominee Choice: Under FEMA rules, an NRI can name either a resident Indian or an NRI as nominee.
- Resident Heir Payout: If a resident Indian inherits an NRE or FCNR deposit, the bank pays out in Indian Rupees.
- NRI Heir Payout: If an NRI inherits an NRE or FCNR deposit, they can send the funds abroad or keep them in an NRE account.
- NRO Remittance Cap: Inherited NRO funds can be remitted abroad up to USD 1 Million per fiscal year with Form 15CA and Form 15CB.
- Nominee vs Legal Heir: The Supreme Court has ruled that a nominee is only a caretaker. Beneficial ownership belongs to legal heirs.
- Apostille Mandate: If the NRI died abroad, the foreign death certificate must have an Apostille or Indian Embassy attestation.
Non-Resident Indians hold large savings in Indian banks. These include NRE rupee accounts, NRO accounts, and FCNR foreign currency fixed deposits. When an NRI passes away, families face complex foreign exchange rules. Claims often involve large sums across banks like SBI, HDFC, ICICI, and Axis Bank.
The claim process depends on two main factors. First, it depends on whether the account has a registered nominee. Second, it depends on whether the claimant is a resident Indian or an NRI living abroad. Indian foreign exchange laws apply different rules to resident and overseas claimants.
In this guide, we review the FEMA deposit rules. We examine key Supreme Court rulings on bank nominees. We also outline the step-by-step claim steps. You can check family inheritance shares on our free succession calculator. You can also review our NRI Will Drafting Service.
1. What Happens to NRE, NRO and FCNR Accounts After Death?
When an NRI bank account holder dies, their bank accounts do not close on their own. The bank freezes debit transactions as soon as it receives formal notice of death. Standing orders, mutual fund SIPs, and cheque clearings stop at once.
The money remains safe with the bank. The bank holds the funds until the legal claimant completes the claim paperwork. How the money is released depends on the type of account under Indian exchange control laws:
Under Schedules 1, 2, and 3 of the FEMA Deposit Regulations, Indian banks must follow strict payout rules for deceased NRI deposits. The form of payment depends on the residency status of the surviving claimant.
Here is how the three types of NRI accounts operate upon death:
A. NRE Accounts: NRE accounts hold foreign earnings converted into Indian Rupees. Funds are freely remittable abroad during the holder's life. After death, these funds can still be sent abroad if the legal heir is an NRI. But if the claimant is an Indian resident, the bank must pay the proceeds in rupees.
B. FCNR(B) Fixed Deposits: FCNR deposits are kept in foreign currencies such as US Dollars, British Pounds, or Euros. The deposit continues to earn interest until maturity or final settlement. If paid to an overseas heir, the bank can pay in foreign currency. If paid to an Indian resident heir, the bank converts the balance into Indian Rupees.
C. NRO Accounts: NRO accounts hold income earned within India. This includes house rent, pension, or dividends. These funds are held in Indian Rupees. When an heir claims an NRO account, the bank pays in rupees. If an NRI heir wants to transfer these funds abroad, they must use the annual USD 1 Million remittance route under FEMA.
2. Can a Resident Indian Be a Nominee in an NRE or FCNR Account?
Yes. A resident Indian can legally be named as a nominee in both NRE and FCNR accounts. Many NRIs name their resident parents, siblings, or spouse as nominee. This nomination is fully valid under RBI rules.
The Reserve Bank of India allows NRIs to name either a resident Indian or an NRI as nominee under the Banking Companies (Nomination) Rules, 1985. The bank records this appointment using Form DA-1 when the account is opened.
If the nominee or legal heir is a resident Indian, the bank cannot transfer foreign currency into an offshore account. Under FEMA rules, the bank must convert NRE and FCNR funds into Indian Rupees. The money is then credited directly to the resident heir's domestic savings account.
A resident Indian heir cannot ask the bank to send foreign currency overseas. A resident can only transfer funds abroad through the Liberalised Remittance Scheme (LRS) after receiving the money in their local account.
3. Payout Matrix: Resident Indian Claimant vs NRI Claimant
Payout rules differ based on where the claimant resides. The table below details the exact payout treatment for each account type:
| Account Type | Currency & Origin | Payout to Resident Indian Heir | Payout to NRI / OCI Heir | FEMA & Tax Rules |
|---|---|---|---|---|
| NRE Savings / FD | INR (from foreign remittances) | Credited in INR to resident savings account | Credited to heir's NRE account or remitted abroad freely | No ceiling on remittance for NRI heirs. Resident heirs receive INR. |
| FCNR(B) Deposit | Foreign Currency (USD, GBP, EUR) | Converted to INR at TT buying rate on payment date | Paid in foreign currency abroad or to heir's FCNR account | Zero exchange loss for NRI heirs. Resident heirs take currency conversion. |
| NRO Savings / FD | INR (domestic Indian income) | Credited in INR to resident savings account | Credited to heir's NRO account in India | Remittance abroad capped at USD 1 Million per fiscal year with Form 15CA/CB. |
All NRE and FCNR balances convert to Indian Rupees in a local account.
NRE and FCNR funds transfer overseas without any limit or tax deduction.
Remittance abroad requires Form 15CA and CA certificate Form 15CB.
4. Nominee vs Legal Heir: Supreme Court Precedents on Ownership
A common myth in India is that a nominee becomes the absolute owner of account funds. Many people assume that naming one child as nominee disinherits other heirs. This view is incorrect under Indian law.
The Supreme Court of India has settled this question in landmark rulings. The key judgment on bank deposit nominations is Ram Chander Talwar & Anr. v. Devender Kumar Talwar & Ors. (2010) 10 SCC 671. The Supreme Court ruled that nomination under Section 45ZA of the Banking Regulation Act does not give ownership.
The Supreme Court held that Section 45ZA gives the bank a valid discharge. The nominee receives the funds merely as an agent or trustee. The money forms part of the deceased person's estate and belongs to the legal heirs.
A three-judge bench of the Supreme Court affirmed the rule from Sarbati Devi (1984). Nomination laws never create a third line of succession. General succession laws and registered Wills always override a bank nomination.
Thus, if an NRI names one child to collect bank deposits, that child cannot keep the money. A valid Will or inheritance law determines who owns the funds. Other legal heirs under the Hindu Succession Act or Indian Succession Act can claim their legal shares in court.
5. Claiming Deceased NRI Bank Accounts: Step-by-Step Procedure
Claiming bank balances from an Indian bank from abroad requires clear steps. Here is the five-step process followed by major Indian banks:
Submit a formal death notice to the home branch manager with a copy of the death certificate. The bank marks the account as deceased to stop all outgoing debits.
If the NRI died abroad, Indian banks need a certified copy. You must get an Apostille stamp if the country is part of the Hague Convention. Otherwise, get attestation from the Indian Embassy.
Check whether the bank records show a valid nomination under Form DA-1. If a nominee is listed, the claim proceeds without needing court probate.
The claimant submits Form DA-2, identity proof (Aadhaar, PAN, Passport, OCI card), and fixed deposit receipts. Overseas claimants can sign papers at the Indian Embassy.
The bank pays out the funds. Resident heirs receive rupees in their domestic account. NRI heirs receive credits into their NRE account or foreign currency wire transfers abroad.
6. What Happens if the NRI Account Holder Died Without a Will?
Dying without an Indian Will causes delays if no nominee is listed on the account. In such cases, the bank cannot release the money to any single family member on simple request.
Banks handle claims without nomination in two ways based on deposit value:
A. Claims Below Bank Threshold Limit: Most commercial banks set an internal limit, usually between ₹5 Lakhs and ₹15 Lakhs. If the balance is below this limit, banks allow settlement without a court order. All legal heirs must sign a joint application, an Indemnity Bond with sureties, and Letters of Disclaimer.
B. Claims Above Bank Threshold Limit: When the deposit exceeds the threshold limit, banks require a court order. The family must obtain a Succession Certificate under Section 370 of the Indian Succession Act or Letters of Administration from an Indian civil court. This process usually takes 9 to 18 months and incurs court fees.
If the NRI leaves properties in Mumbai, Kolkata, or Chennai, probate of the Will may be required under Section 213 of the Indian Succession Act. You can read our guides or consult an advocate through our platform.
7. Sample Bank Claim Clauses for a Separate Indian Will
To prevent family disputes and bank delays, an NRI should make a separate Indian Will. The Will should clearly state how Indian bank deposits and investments must be distributed:
8. How an Indian Will Speeds Up Overseas Account Claims
Managing an estate across borders is complex. Many NRIs draft a Will in their country of residence (such as the US, UK, or UAE) and assume it covers their Indian bank accounts. But foreign Wills require ancillary probate and court resealing in India under Section 228 of the Indian Succession Act. This process involves expensive apostilles, court hearings, and long delays.
The cleanest legal solution is to maintain two separate Wills. One Will governs foreign assets in your country of residence. The other separate Indian Will governs Indian bank accounts, fixed deposits, shares, and real estate.
With a separate Indian Will, your executors and family can approach Indian bank branches directly. If you also plan to repatriate proceeds from inherited real estate, review our guide on NRI Property Sale & 15CA/CB Repatriation or examine our NRI Separate Indian Will Template.
Our online platform enables NRIs worldwide to draft a legally sound Indian Will in minutes. Start your Will drafting journey today on our self-serve online Will platform to protect your family's future.
