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CS Executive · Setting Up of Business, Industrial and Labour Laws · Financial Services Organization

Kaveri Capital, a non-banking financial institution, holds a deposit of Rs 5,00,000 from Mr Rao as sole depositor. He nominated his daughter Anita, aged 16, and appointed his brother Suresh to receive the money if he dies during her minority. Mr Rao dies. Under the Reserve Bank of India Act, 1934 (Section 45QB), what is the position?

Payment to the person Mr Rao appointed, his brother Suresh, discharges the institution. Section 45QB lets a depositor appoint someone to receive the deposit during a minor nominee's minority, the nomination overrides other dispositions, and payment under the section is a full discharge.

  1. AThe deposit goes to Mr Rao's legal heirs under his will, ignoring the nomination
  2. BPayment to the person appointed to receive the amount during Anita's minority discharges the institutionCorrect
  3. CPayment is barred until Anita turns 18 and the institution must keep the deposit
  4. DThe institution must first publish notice inviting claims from other persons

Explanation

Section 45QB(3) allows the depositor to appoint a person to receive the amount if he dies during the nominee's minority. Under 45QB(4), payment under the section fully discharges the institution. Under 45QB(2) the nomination overrides any disposition, including a will, so the first option is wrong.

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