Inoperative & unclaimed accounts: How will the RBI’s revised guidelines benefit customers?

A customer induced transaction can be a financial transaction initiated by or done at the behest of the account holder by the bank or third party, or a non-financial transaction, or a KYC (know your customer) updation done in face-to-face physical mode or through digital channels such as internet banking or mobile banking application of the bank. Around Rs 1-1.30 lakh crore is estimated to be lying in inoperative bank accounts.

What are unclaimed deposits?

Balances in savings / current accounts which are not operated for 10 years, or term deposits not claimed within 10 years from date of maturity are classified as ‘unclaimed deposits’. The government recently informed the Parliament that unclaimed deposits of Rs 42,270 crore are lying with the banks as of March 2023.

What do the revised RBI guidelines say?

The RBI has asked banks to undertake at least an annual review in respect of accounts, where there are no customer induced transactions for more than a year. In cases where there is no explicit mandate to renew the term deposit, banks need to review such accounts if the customers have not withdrawn the proceeds after maturity or transferred these to their savings/current account in order to prevent such deposits from becoming unclaimed.

Banks should communicate to the account or deposit holders through letters or email or SMS that there has been no operation in their accounts in the last one year. The alert messages should 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 KYC documents afresh for reactivating the account in such case.

Which account can be classified as inoperative?

For the purpose of classifying an account as inoperative, only customer induced transactions and not bank induced transactions shall be considered. There may be instances where the customer has given a mandate like standing instructions (SI)/ auto-renewal instructions and there are no other operations in the savings /current account or the term deposit. These transactions shall also be treated as customer-induced transactions. Bank-induced transactions are transactions in the account initiated by the bank such as charges, fees, interest payments, penalties and taxes.

The classification of an account as inoperative will be for a particular account of the customer and not with reference to the customer.

Which accounts cannot be classified as inoperative accounts?

Banks open zero balance accounts for beneficiaries of Central/State government schemes and for students who receive scholarships. Central and State governments have been expressing difficulty in crediting cheques or direct benefit transfer or electronic benefit transfer or scholarship amount in these accounts as they are also classified as inoperative due to non-operation for two years.

The RBI said that banks should, based on the purpose of opening of the account, segregate such accounts in their core banking solution (CBS), so that the stipulation of ‘inoperative’ accounts is not applicable to these accounts due to their non-operation for a period of more than two years.

How can an inoperative account be reactivated?

The RBI has asked banks to make available the facility of updation of KYC for activation of inoperative accounts and unclaimed deposits at all branches (including non-home branches) and through video-customer identification process (V-CIP) if requested by the account holder and subject to the facility of V-CIP being provided by the bank.

Banks should activate the inoperative accounts or unclaimed deposits only after adhering to the KYC guidelines, it said.

Can banks charge for activation of inoperative accounts?

The RBI has said that no charges should be levied for activation of inoperative accounts.

Is there any penalty on non-maintenance of minimum balances in an inoperative account?

The banks are not permitted to levy penal charges for non-maintenance of minimum balances in any account that is classified as an inoperative account.

Will banks pay interest on savings accounts which are inoperative?

Interest on savings accounts should be credited on a regular basis irrespective of the fact that the account is in operation or not, the RBI said.