INOPERATIVE
ACCOUNT - ECONOMY
News:
RBI issues revised
instructions concerning inoperative accounts, unclaimed deposits in banks
What's
in the news?
●
The Reserve Bank of India (RBI) has
revised guidelines for classifying accounts and deposits as inoperative
accounts and unclaimed deposits, aiming to streamline the classification and
activation processes.
Key
takeaways:
●
This revised circular is applicable to all
Commercial Banks (including RRBs) and all Cooperative Banks and this will come
into effect from April 1, 2024.
●
It's estimated that approximately 1 to 1.3
trillion Indian Rupees are currently held in these dormant bank accounts.
Inoperative
Accounts:
●
An account becomes inoperative when there haven't been any transactions initiated by
the customer for more than two years.
●
Transactions that qualify as 'customer-
induced' include
○
Any financial activity initiated directly
by the account holder or on their behalf by the bank or a third party.
○
Any non-financial transaction, or updates
to the account holder's KYC (Know Your Customer) information, either through
in-person verification or digital methods like internet or mobile banking.
Unclaimed
Deposits:
●
Funds in savings or current accounts that
have seen no activity for a decade, or fixed deposits that have not been claimed for ten years after their
maturity date, are categorised as unclaimed deposits.
●
As of March 2023, banks are holding about
42,270 crore Indian Rupees in such unclaimed funds.
Revised
Guidelines By RBI:
1.
Yearly Assessment:
●
The Reserve Bank of India mandates banks
to annually review accounts that
haven't seen any customer-driven transactions for more than one year.
2.
Account Inactivity Alerts:
●
Banks are required to inform customers
through letters, emails, or text messages if their accounts have been inactive
for a year, cautioning them about the potential change to 'inoperative' status
if no transactions occur in the following year.
3.
Criteria for Inoperative Accounts:
●
An account is marked as inoperative based solely on the absence of customer-initiated
transactions, not considering actions initiated by the bank such as fees,
interest credits, or penalties.
4.
Exemptions from Inoperative Classification:
●
Accounts with zero balance, specifically
those used by recipients of government
welfare programs and students receiving scholarships, are exempt from being
labelled as inoperative.
5.
Specific Account Classification:
●
The designation of an account as
inoperative is confined to that specific account and does not reflect on the
customer's other accounts.
6.
Reactivation of Dormant Accounts:
●
The RBI requires banks to facilitate KYC
updates for reactivating inoperative accounts and accessing unclaimed deposits at all branches, including those not
designated as the customer's home branch, without
imposing any fees.
7.
No Penalties on Inoperative Accounts:
●
Banks are prohibited from charging
penalties for failing to maintain minimum balances in accounts deemed
inoperative.
8.
Continuation of Interest Accrual:
●
Interest on savings accounts should
continue to be credited routinely, irrespective of whether the account is
active or inoperative.