Directives issued by RBI on Inoperative Accounts

Directives issued by RBI on Inoperative Accounts

Subject :Economy

Section: Monetary Policy

1. Annual Review of Dormant Accounts:
   • Central Bank instructed to conduct an annual review of accounts with no customer-induced transactions for over a year.
   • Term deposit accounts without explicit renewal mandates, where funds remain unwithdrawn after maturity, are also subject to review.
   • Zero-balance accounts opened for the credit of scholarship amount or Direct Benefit Transfer under government schemes are exempted.
   • Cautionary communication stating that the account will be deemed ‘inoperative’ without transactions during the extended period.
2. Account Classification:
   • The classification of inoperative accounts is specific to each customer account, not across multiple accounts of the same custome
3. Reactivation Procedures:
   • Inoperative accounts may be reactivated, subject to fresh KYC documentation and a second level of authorization.
   • Banks to enquire about the whereabouts of unresponsive account holders or nominees/heirs.
4. Fraud Prevention Measures:
   • Regular monitoring of reactivated inoperative accounts for at least six months without customer or staff knowledge.
   • Maintenance of system logs and concurrent audit for inoperative and reactivated accounts.
   • Consideration of imposing a cooling-off period on reactivation, with restrictions on the number and amount of transactions.
5. Disclosure Requirements:
   • Banks obligated to display details of unclaimed deposits transferred to the RBI-maintained Depositor Education and Awareness Fund (DEA) monthly.
   • Provision of information on the process for activating inoperative accounts and claiming balances.
6. Fund Transfer to DEA:
   • Credit balance in deposit accounts inactive for at least 10 years or unclaimed amounts for 10 years to be transferred to the DEA Fund.

Unclaimed Deposits:

• Unclaimed deposits refer to the funds held in bank accounts that remain untouched or unclaimed for a period of 10 years.
• After the specified period, unclaimed deposits are transferred to the Depositor Education & Awareness Fund (DEA) maintained by the RBI. The DEA Fund is utilized for promoting depositor education and awareness initiatives.

Depositor Education and Awareness (DEA) Fund Scheme

The Depositor Education and Awareness Fund (DEA) is a fund maintained by the Reserve Bank of India (RBI) with the objective of promoting depositor education and awareness. It serves as a mechanism to utilize unclaimed deposits that have been inactive for a specified period, 10 years, and unpaid matured deposits in the banking system for a productive purpose.

1. Objective of DEA Fund Scheme:
   • Established by the Reserve Bank of India (RBI) in 2014.
   • Create awareness among depositors and protect their interests regarding unclaimed deposits.
2. Source of Funds:
   • Unclaimed deposits in savings, fixed, recurring, and other deposit accounts contribute to the DEA. Additionally, matured deposits that remain unclaimed are also transferred to this fund.
3. Management:
   • The RBI manages and maintains the DEA Fund.
4. Public Awareness:
   • Activities funded by DEA aim to raise public awareness about the importance of financial planning, safe banking practices, and understanding banking terms and conditions.
5. Contributions to DEA Fund:
   • Public sector banks: Transferred Rs 36,185 crores of unclaimed deposits until March 31, 2023.
   • Private banks: Transferred Rs 6,087 crores to the DEA Fund during the same period.
   • Collective effort to address unclaimed deposits and prioritize consumer welfare.
6. Centralized Web Facility:
   • RBI’s plan to establish a centralized web facility.
   • Public can use the web facility to locate unclaimed deposits across various financial institutions.
   • Aims to enhance consumer accessibility, facilitate the resolution process, and ensure rightful claimants receive unclaimed funds.

Other RBI Schemes:

1. RBI Retail Direct Scheme:
   • This scheme provides a direct avenue for retail investors to invest in government securities issued by both the central and state governments.
2. RBI Integrated Ombudsman Scheme:
   • Introduced to enhance the grievance redress mechanism, this scheme facilitates the resolution of customer complaints against entities regulated by the RBI.
3. Payments Vision 2025:
   • This initiative outlines the RBI’s vision for the year 2025 with the objective of providing users with safe, secure, fast, convenient, accessible, and affordable e-payment options.