The Reserve Bank of India (RBI) has directed banks to annually review accounts where there have not been customer-induced transactions for over a year and term deposit accounts where there's no explicit renewal mandate and customers have not withdrawn the proceeds after maturity.
"Banks shall undertake at least an annual review in respect of accounts, where there is no customer-induced transactions for more than a year. In cases where there is no explicit mandate to renew the term deposit, the banks should review such accounts if the customers have not withdrawn the proceeds after maturity or transferred these to their savings or current account to prevent such deposits from becoming unclaimed," the central bank says in its revised instructions on inoperative accounts or unclaimed deposits in banks.
The banks will inform the account or deposit holders in writing through letters email or SMS that there has been no operation in their accounts/deposits in the last year. The alert messages will mention the account will become ‘inoperative’ if no operations are carried out during the next year and, the account holder will be required to submit KYC documents afresh to reactivate the account.
In case of no revert, the bank will immediately undertake an enquiry to find out the whereabouts of the account holder or his/her nominee in case the account holder is deceased.
If the response is received, the account will continue to be operative for one more year. "In case the account holder still fails to operate the account within the extended period, the banks shall classify the said account as inoperative account after the expiry of the extended period," the guidelines say.
The RBI says to classify an account as ‘inoperative’, only customer-induced transactions and not bank-induced transactions shall be considered.
Mandates like standing instructions(SI)/ auto-renewal instructions will also be treated as customer-induced transactions. The classification of an account as "inoperative" will be for a particular account of the customer and not with reference to the customer. If a customer maintains multiple accounts with a bank, all such accounts will be assessed individually.
If one is not carrying out transactions and the account is -- inoperative due to the shifting of the primary account to another bank, the account holder may be requested to provide the details of the new bank account with authorisation to enable the bank to transfer the balance from the existing bank account.
On the treatment of accounts opened for the credit of scholarship amount and credit of direct benefit transfer under government schemes, the banks will segregate such accounts in core banking solution, so the stipulation of ‘inoperative’ account is not applicable to these accounts due to their non-operation for over two years.
The RBI says to avoid fraud in such accounts while allowing operations in these accounts, the bank should exercise "due diligence".
For the segregation and the audit of inoperative accounts or unclaimed deposits, the RBI says the segregation of "inoperative accounts" is required to be done to reduce the risk of fraud. The transactions in inoperative accounts, which have been reactivated, will be monitored regularly, for at least six months, at higher levels without the knowledge and notice of the customers and the dealing staff.
The amounts lying in "inoperative accounts" or "unclaimed deposits" and "reactivated inoperative accounts" will also subjected to concurrent audit. This will also help reduce fraud, says the central bank.
