RBI Issues Guidelines For Banks To Manage Inoperative Accounts

The Reserve Bank of India has issued revised guidelines for banks to classify and manage inoperative accounts and unclaimed deposits.

The new guidelines are expected to help "reduce the quantum of unclaimed deposits in the banking system and return such deposits to their rightful claimants", the RBI said.

The instructions will come into effect on April 1.

An amount lying idle in any deposit account for 10 years or more is required to be transferred by banks to the RBI's Depositor Education and Awareness Fund.

Following are the guidelines prescribed by the central bank for unclaimed deposits:

• Banks must annually review accounts where there is no customer-induced transactions for more than a year.

• Banks must inform deposit holders in writing of inactivity in their accounts in the last one year.

• If the intimation goes unanswered, the bank must immediately conduct an enquiry on the whereabouts of the account holder or any legal heirs.

• In case of a response from the account holder citing reasons, banks must continue to classify the account as operative for one more year.

• Banks must segregate the inoperative accounts used for Direct Benefit Transfer under government schemes, so that these accounts are not labelled 'inoperative' due to non-operation for more than two years.

• Segregation of inoperative accounts is crucial to reduce the risk of frauds.

• Transactions in reactivated accounts must be monitored regularly, for at least six months by higher authorities discreetly.

• Banks must facilitate updation of know-your-customer requirements for activation of inoperative accounts at all branches, including video KYC.

• Accounts frozen by law enforcement agencies, courts and tribunals must be reactivated only after KYC norms.

• Bank must inform account holders of status of their accounts after they have submitted KYC documents.

• Banks cannot levy penal charges for non-maintenance of minimum balances in any inoperative account.

• No charges shall be levied for activation of inoperative accounts.

Banks must conduct public awareness and financial literacy campaigns regularly to educate the public about the activation of inoperative accounts or unclaimed deposits, the central bank said.

To ensure prevention from frauds in inoperative accounts, the banks must not allow any debit transaction in an inoperative account unless "there is a customer-induced activation". Banks may also consider imposing a cooling-off period on reactivation, with restrictions on the number and amount of transactions, it said.

Banks must ensure that there is no unauthorised access to customer data pertaining to the inoperative accounts, the RBI said.