The Hindu Business Line : Banks told to review inoperative accounts

Banks must make an annual review of such accounts and inform the customers of the same. They can also ask customers for reasons why the account remains inoperative.

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Mumbai, Aug. 22 Banks must play a more pro-active role in finding the whereabouts of account holders whose accounts have remained inoperative and must also continue to pay the interest on such deposits, said the Reserve Bank of India in a notice issued on Friday.

RBI has issued these instructions in view of the increase in the amount of unclaimed deposits with banks and the inherent risk associated with such deposits. “Interest on savings bank accounts should be credited on a regular basis whether the account is operative or not. If a fixed deposit receipt matures and proceeds are unpaid, the amount left unclaimed with the bank will attract savings bank rate of interest,” said RBI in its note issue.

A savings as well as current account should be treated as inoperative or dormant if there are no transactions, either credit or debit, for over a period of two years. However, the service charges levied by the bank or interest credited by the bank should not be considered.

The RBI said that banks must make an annual review of such accounts and inform the customers of the same. They can also ask customers for reasons why the account remains inoperative.

In case the account holder gives a reply for not operating the account, banks should continue classifying the account as an operative account for one more year. However, if the customer still does not operate the account during the extended period, banks should classify the account as inoperative after the expiry of the extended period.

There should no charge for activation of inoperative account. If customers have shifted from the locality, then banks can ask for details of their new bank accounts to which the balance in the existing account may be transferred.

Avoiding inconvenience

The RBI also clarified that while the segregation of the inoperative accounts is from the point of view of reducing the risk of frauds, customers should not be inconvenienced in any way. “The classification is there only to bring to the attention of dealing staff, the increased risk in the account. The transaction may be monitored at a higher level both from the point of view of preventing fraud and making a Suspicious Transactions Report. However, the entire process should remain un-noticeable by the customer,” the RBI said.

In case of unclaimed deposits, banks wait for as long as 10-20 years for the deposit holder or some legal heir to claim the amount, said a senior bank official with a leading public sector bank.

Tracing deposit holders

The bank periodically takes steps to trace the deposit holders. If the amount is small, the bank may issue a few reminders and leave it at that. But if the amount is huge, the bank takes serious efforts to trace the deposit holders.

“Only if it is really not possible to track the deposit holder, is the money given to the Government, as then it belongs to the Government. But usually that does not happen. During the period, some legal heir or the deposit holders themselves come forward to claim the amount,” the official said.

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