Centre directs banks to ensure nominees for all accounts and lockers

A bank official said that both the government and the RBI have stated that money should not be accumulated in the depositor education and awareness fund

The Centre has directed banks to make sure that all deposit accounts and safe deposit boxes have a nominee, said a report by The Economic Times (ET).

This comes as both the Reserve Bank of India (RBI) and the government are working to reduce unclaimed deposits with commercial banks totaling around Rs 50,000 crore.

The development was confirmed by a top official, who also stated that the government has notified RBI about it. "We have also had separate discussions with state-run lenders. This helps banks as well because there may be legal concerns that affect both banks and their clients when there isn't a nomination," said the official.

Earlier this year, Bhagwat Karad, minister of state for finance, informed the Lok Sabha that public sector banks (PSBs) had transferred Rs 35,012 crore in unclaimed deposits to the RBI by the end of February 2023 from accounts that had not been used for 10 years or more.

A bank executive familiar with the situation told ET that lenders are in negotiations with the RBI and one of the ideas is that bank branches be held accountable and that both the nomination and tracing of unclaimed deposits be included in their performance evaluation.

"Both the government and the RBI have made it clear that they are not in favour of more money being accumulated in the depositor education and awareness fund," he said.

Last week, the RBI launched the '100 Days, 100 Pays' campaign to locate and settle the top 100 unclaimed deposits from each bank. Under the initiative, banks would track and settle their top 100 deposits in each district of the country.

"We are considering bringing PSB Alliance on board to develop a common mechanism for tracing customers and informing them accordingly," the bank executive added.

According to the RBI's directive, term deposits that are not claimed within 10 years of their maturity date are considered "unclaimed deposits," as are savings or current accounts that have not been operated for 10 years.

These funds are transferred by banks to the RBI's fund for depositor education and awareness. The depositors can still claim their money at a later date from the bank, along with any applicable interest.