The problem of unclaimed balances lying with banks has refused to go away, despite the government and Reserve Bank of India (RBI) making a concerted push for banks to track down the rightful owners and repay them. A special drive in 2023, piloted by the Finance Ministry asking banks to settle their top 100 unclaimed accounts within 100 days, yielded limited results, with about ₹1,432 crore estimated to have been repaid. However, data disclosed to Parliament has shown that banks were sitting on unclaimed deposits of ₹42,272 crore by March 2023, the number up by 28 per cent in one year. Therefore, RBI’s decision to launch a centralised portal (named UDGAM) where depositors can search for unclaimed deposits held in the Depositor Education and Awareness (DEA) Fund and lodge a claim through their bank, is a welcome step.

The UDGAM initiative however addresses only part of the problem. The DEA fund houses only those bank accounts and term deposits where balances have remained unclaimed for 10 years or more. Far larger sums are believed to be lying in the ‘inoperative’ accounts of banks — accounts that have seen no activity for two years. Further efforts by RBI and banks may be necessary to ensure that account holders or their beneficiaries can get their hands on these balances, ahead of their transfer into the DEA Fund. A primary contributor to inoperative accounts seems to be the death of bank account-holders without specifying nominees.

The RBI and banks can undertake a nationwide campaign, on the lines of SEBI’s campaign on nominations for demat accounts, to urge the public to update nominees on bank accounts. Where nominations don’t exist, the procedure for transmitting the balances of deceased account holders to their legal heirs needs to be simplified. Presently, banks have differing procedures requiring surety signatures and notarised affidavits to transmit proceeds, even where beneficiaries possess legal heirship or succession certificates. Another big contributor to dormant accounts is customers relocating to another city or town and opening new accounts, but failing to close their older ones. Allowing seamless transfer of accounts between the branches of a bank can solve this problem. With technology, it would be even better if banks did away with the concept of a home branch. Users of banking services also need to be nudged to change certain behaviours. Many depositors still split their balances across multiple bank accounts to avoid taxes, whereas the tax department is able to aggregate accounts at the PAN level.

Efforts to track down the owners of unclaimed accounts should start with the acknowledgment that not all Indians are digitally savvy. This is more so after the success of Jan Dhan Yojana, which has endowed many lower and middle-income Indians with bank accounts. Therefore, digital interfaces need to be accompanied by physical touch-points where bank account holders or beneficiaries can identify unclaimed balances and lodge claims for them.

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