Strengthening its ongoing efforts to reduce the quantum of unclaimed deposits in the banking system and return such deposits to their rightful owners or claimants, the Reserve Bank of India (RBI) has
issued a revised set of instructions. The revised instructions will come into effect from 1 April 2024.
As a measure to assist the account-holders and consolidate and rationalise the extant instructions on inoperative accounts, RBI says it carried out a review in consultation with all stakeholders. According to the new directions, banks are mandated to undertake a review of accounts where there are no customer-induced transactions for more than a year. Banks will also have to segregate in their core banking system (CBS) accounts opened for credit of scholarship amount and credit of direct benefit transfer (DBT) under government schemes in their CBS so that the stipulation of inoperative account does not apply to these accounts due to their non-operation for more than two years.
Banks will have to segregate and audit inoperative accounts or unclaimed deposits to reduce the risk of fraud. Further, banks will also have to contact holders of inoperative accounts or unclaimed deposits through letters, email or SMS (if the email and mobile number are registered with the bank). The email and SMS will be sent quarterly.
Just a few days ago,
Moneylife's managing editor, Sucheta Dalal, wrote about how an astonishing sum of nearly Rs1 lakh crore, by conservative estimates, representing the earnings of ordinary people, is lying with banks under the heading 'inoperative accounts'. While some of these may become operative, she wrote that it represents money on the way to being classified as 'unclaimed funds'. (
Read: Over Rs1 Lakh Crore Lying in Inoperative Bank Accounts on Way To Becoming Unclaimed Funds)
Based on its review, RBI decided to issue comprehensive guidelines covering various aspects of classifying accounts and deposits as inoperative accounts and unclaimed deposits, as the case may be, periodic review of such accounts and deposits, measures to prevent fraud in such accounts or deposits, grievance redressal mechanism for expeditious resolution of complaints, steps to be taken for tracing the customers of inoperative accounts or unclaimed deposits including their nominees or legal heirs for re-activation of accounts, settlement of claims or closure and the process to be followed by them.
In cases where there is no explicit mandate to renew the term deposit, RBI says, banks should review such accounts if the customers have not withdrawn the proceeds after maturity or transferred these to their savings or current account to prevent such deposits from becoming unclaimed. "The banks shall inform the account or deposit holders in writing through letters or email or SMS (if the email and mobile number are registered with the bank) that there has been no operation in their accounts or deposits in the last one year, as the case may be. The alert messages shall invariably mention that the account would become 'inoperative' if no operations are carried out during the next one year and the account holder would be required to submit know your customer (KYC) documents afresh for reactivating the account in such case."
"If the letters are returned undelivered, or no response is received through registered email, the bank should immediately undertake an enquiry to find out the whereabouts of the account holder or his or her nominee or legal heirs in case the account holder is deceased," RBI says.
According to the directions, for classifying an account as 'inoperative', only customer-induced transactions and not bank-induced transactions should be considered. "There may be instances where the customer has given a mandate like standing instructions (SI) or auto-renewal instructions and there are no other operations in the savings or current account or the term deposit. These transactions should also be treated as customer-induced transactions."
In case a customer is maintaining multiple accounts or deposits with a bank, all such accounts or deposits should be assessed individually for classifying them as inoperative accounts or unclaimed deposits, as the case may be, RBI says, adding, "In case the account holder is not carrying out transaction and the account is - inoperative due to shifting of primary account to another bank, the account holder may be requested to provide the details of the new bank account with authorisation to enable the bank to transfer the balance from the existing bank account."
Banks open zero-balance accounts for beneficiaries of Central or state government schemes and students who receive scholarships. RBI says Central and state governments have been having difficulty crediting cheques, DBT, electronic benefit transfers, and scholarship amounts in these accounts as they are also classified as inoperative due to non-operation for two years.
"The banks should, based on the purpose of opening the account, segregate the accounts mentioned above in their CBS so that the stipulation of 'inoperative' account does not apply to these accounts due to their non-operation for more than two years. To avoid the risk of fraud in such accounts while allowing operations in these accounts, the bank should exercise due diligence as per the extant instructions," the regulator says.
In case the whereabouts of the holders of the inoperative account or unclaimed deposit are not traceable, RBI says, banks should contact the introducer, if any, who had introduced the account-holder to the bank at the time of opening of the account. The banks should also contact the nominee, if registered, to trace the customer.
Banks have also been instructed to host the details of unclaimed deposits, including name, address (without pin code) and unclaimed deposit reference number (UDRN), which have been transferred to the DEA fund of RBI on their respective websites which shall be updated regularly, at least every month.
The banks that do not have their own websites should make the list of unclaimed deposits in their respective branches available. The database hosted on the website should provide a search option to enable the public to search for their unclaimed deposits using their name in combination with the account-holder's or entity's address.
Activation of Inoperative Accounts
RBI asked banks to make available the facility of updation of KYC for activation of inoperative accounts or unclaimed deposits at all branches, including non-home branches, and through video-customer identification process (V-CIP) if requested by the account-holder, subject to the facility of V-CIP being provided by the bank. There are no charges for the activation of inoperative accounts.
"Banks should activate the inoperative accounts or unclaimed deposits, including those which are under freeze by orders of various agencies like courts, tribunals, law enforcement agencies (LEAs), only after adhering to the KYC guidelines provided in the master direction - KYC Direction dated 25 February 2016, which are updated from time to time, such as customer due diligence (CDD), customer identification and risk categorisation," RBI says.
However, activation of inoperative accounts or unclaimed deposits in CBS must be done through a second level of authorisation by another officer at the same or higher level (i.e., through maker and checker). RBI says system logs should invariably be maintained in case of any activity in or activation of inoperative accounts or unclaimed deposits for concurrent audit purposes. The preservation period of such system logs will be as per the bank's internal guidelines.
Further, RBI says banks should automatically intimate the inoperative account or unclaimed deposit-holders through SMS and registered email stating that, on the basis of the KYC documents submitted by them, the inoperative status of the account has been removed. "The intimation should also mention the remedial measures available to them to report unauthorised access, if any. This would alert the account or unclaimed deposit holder against any possible fraudulent activity in his or her inoperative account."
According to RBI, interest on savings accounts should be credited on a regular basis irrespective of whether the account is in operation or not. Further, banks are not permitted to levy penal charges for non-maintenance of minimum balances in any account that is classified as an inoperative account.
