Unclaimed Deposits/ Inoperative A/c in Banks- RBI Instruction
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Unclaimed Deposits or Inoperative Ac in Banks- RBI Revised Instructions
RBI has issued revised Instructions w,e.f. 1st April 2024 relating to Inoperative Accounts/ Unclaimed Deposits in all Commercial Banks (including RRBs) and all Co-operative Banks and waiver of related Penal Charges. As a result existing RBI Revised Instructions on these issues shall stand repealed from the said date.
Any credit balance in a deposit account that has not been used for ten years or more, or any unclaimed amount for the same period of time as specified in paragraph 3(iii) of the “Depositor Education and Awareness” (DEA) Fund Scheme, 2014, shall be transferred by banks to the Depositor Education and Awareness Fund maintained by the RBI, according to the updated RBI Revised Instructions from Reserve Bank of India dated 01/01/2024, regarding Unclaimed Deposits or Inoperative Ac in Banks.
The Reserve Bank of India collaborated with all stakeholders to conduct a review aimed at helping account holders and streamlining the current guidelines on dormant accounts. Comprehensive guidelines covering a wide range of measures, such as classifying accounts and deposits as unclaimed or inactive, reviewing such accounts and deposits on a regular basis, preventing fraud, addressing complaints, tracking down customers of unclaimed or inactive accounts and reactivating their accounts, settling claims or closing accounts, and outlining the required procedures, will be issued to banks based on the results of this review.
To support the ongoing efforts of banks and the Reserve Bank of India to lower the quantity of unclaimed deposits in the banking system and return them to their rightful owners or claimants, the Reserve Bank of India has issued comprehensive guidelines.
The updated Reserve Bank of India guidelines regarding Unclaimed Deposits or Inoperative A/c will be w,e.f. 1st April 2024 for all Bank.
Commercial Banks Review of Inoperative Accounts
As per Reserve Bank of India instructions, When a customer hasn’t initiated a transaction for more than a year, the banks ought to evaluate those accounts at least once a year. When a term deposit matures and there are no clear instructions for renewal, banks should check to see if consumers have moved the funds to their deposit or current accounts. This will stop these deposits from being unclaimed.
Intimation by Commercial Banks to A/c Holders
As per Reserve Bank of India instructions, When there haven’t been any transactions in an account or deposit over the previous year, the banks are required to notify account holders in writing via letter, email, or SMS (if registered). The messages ought to state that if there are no transactions within the following year, the account will become “inactive.” In these situations, in order to reactivate the account, the account holder would have to submit Know Your Customer paperwork once more.
If emails are registered and letters are returned unanswered, the bank ought to look into the whereabouts of the account holder, nominee, or, in the event of death, the heirs.
Classification of A/c as Inoperative
As per Reserve Bank of India instructions, Commercial Banks should keep designating an account as active for an additional “extended period” if the account user provides explanations for why the account hasn’t been used. After expiration, banks should categorise it as inactive if it is still not operated within this time frame.
Only transactions initiated by the customer—not by the bank—should be taken into account when designating an account as “inactive.” Customer-initiated transactions should also include standing orders and auto-renewals that have no further operations.
The designation of “inactive” pertains to a particular account, not the client. Each account or deposit made by a consumer should be evaluated separately.
If the account holder moved their primary account elsewhere, causing inactivity, they may be required to submit new bank information and permission to transfer the balance.
Treatment of A/c for Government Benefits or Scholarships.
For students receiving scholarships and those benefiting from federal or state government programmes, banks open zero balance accounts. It is challenging for governments to credit these accounts with checks, Direct Benefit Transfers, Electronic Benefit Transfers, or scholarships since the accounts are deemed inactive after two years of non-operation.
In accordance with guidelines from the Reserve Bank of India, banks must classify these accounts differently in their Core Normal Banking System depending on why the account was opened. In this manner, even if they haven’t conducted any business for more than two years, the “inactive account” requirement won’t apply to them.
When allowing operations, banks should use due diligence in accordance with current guidelines to reduce the risk of fraud in such accounts. Genuine government credits won’t be refused because of forced inactivity thanks to segregation.
Segregation & Audit of Unclaimed Deposits or Inactive A/c
The Reserve Bank of India has instructed that idle accounts be divided in order to lower the risk of fraud. Transactions involving revived inactive accounts should be routinely observed at higher authority levels for a minimum of six months, hidden from customers and employees.
The balances in unclaimed deposits and inactive accounts, including those that have been reactivated, must be concurrently audited by commercial banks.
Controlling authorities can more easily keep an eye on segregated areas and identify any questionable reactivation behaviour. Funds from dormant accounts are handled properly, according to concurrent audits. When combined, these steps improve supervision and lower the risk of fraud.
Tracing Customers of Inactive A/c/Unclaimed Deposits
As per Reserve Bank of India instructions, the banks should contact inactive account/unclaimed deposit holders quarterly by letter, email or SMS (Short Message Service) (if registered).
RBI Instructions Related Definitions
Reserve Bank of India has defined few key terms related to instructions on unclaimed deposits and inactive accounts:
(b) Customer-initiated transaction: Transactions initiated by or for the account holder with the bank or third party. This includes financial transactions, non-financial transactions like balance inquiry, and Know Your Customer updates done in-person or digitally.
(a) Commercial Banks –initiated transaction: Transactions in the account initiated by the bank as per its policy, like fees, interest, penalties, taxes etc.
(b) Inactive account: A current or savings account with no ‘customer-initiated transactions’ for over 2 years.
(c) Financial transaction: A money transaction in the current or savings account , either a credit or debit.
(d) Unclaimed Deposit Reference Number (UDRN): A unique number generated via Core Banking Solution (CBS) and assigned to each unclaimed account/deposit transferred to Reserve Bank of India Depositor Education and Awareness Fund. The number does not identify the account holder or bank branch.
(e) Unclaimed deposits: The credit balance in any deposit account not operated for ten or more years, or any amount unclaimed for ten or more years.
(f) Non-financial transaction: An inquiry or request for any product/service initiated by the account holder via automated teller machine, internet or mobile banking that requires authentication and leaves an audit trail.
Other terms have the same meaning as in the Reserve Bank of India Act, 1934, Banking Regulation Act, 1949, or as commonly used.
Complete RBI Revised Instructions on Unclaimed Deposits or Inoperative Ac in Banks- are mention here under : Link
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