RBI takes steps to curb inoperative bank accounts: Things you should know

The RBI has issued fresh guidelines to reduce the quantum of inoperative bank accounts and unclaimed deposits with focus on tracing customers, and reducing fraud risk. Check all the details

The Reserve Bank of India (RBI) has issued revised instructions for inoperative accounts and unclaimed deposits in banks, which are set to come into effect from the new financial year, which commences on April 1.

The RBI said it carried out a review of the situation and, consequently, has decided to issue comprehensive guidelines to the banks to streamline the process of handling such cases further. These measures include placing a smooth mechanism for classifying accounts and deposits inoperative accounts and unclaimed deposits, at least one annual review of such accounts and deposits, attempting to contact the customers in such cases via registered mail the phone numbers, increasing customer awareness on their websites and branches, among other steps.

If customer shifts primary bank account

According to the revised instructions, in case the account holder 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.

Tracing customers, nominees of unclaimed deposits

The central bank has also decided to step up existing efforts to trace the customers of such accounts to reduce unclaimed deposits and ensure their return to the rightful customers or claimants. The RBI said that the banks would need to carry out special drives to contact the customers of such accounts and claims, including their nominees and legal heirs for re-activation of such accounts, settlement of claims or its closure.

To reduce fraud risk

The RBI has instructed the banks to segregate inoperative accounts in order to reduce the risk of fraud. “The transactions in inoperative accounts, which have been reactivated, shall be monitored regularly, for at least six months, at higher levels (i.e. by controlling authorities of the concerned branch) without the knowledge and notice of the customers and the dealing staff,” the notification said. The banks have also been instructed to ensure that amounts lying in inoperative or reactivated accounts and unclaimed deposits are subjected to concurrent audit.

In such cases, the banks will not allow any debit transaction in an inoperative account unless there is a customer-induced activation, according to the revised guidelines. In addition, the banks have also been instructed to strengthen the data protection measures.

What is an inoperative account?

According to the RBI circular, a savings or a current account shall be treated as inoperative if the customer has no transactions in the account for a period of over two years.

What happens to unclaimed deposits?

According to the existing RBI norms, any amount in the deposit accounts maintained with banks which have not been claimed for ten years or more is required to be transferred by the banks to ‘The Depositor Education and Awareness’ (DEA) Fund maintained by the Reserve Bank of India.

What is Unclaimed Deposit Reference Number (UDRN)?

In case an individual has an unclaimed deposit that has been transferred to the DEA Fund of the RBI, the individual is assigned a unique number, which is generated through Core Banking Solution (CBS). “The number shall be such that the account holder or the bank branch where the account is maintained, cannot be identified by any third party,” the RBI circular reads.

How do you reactivate an inoperative bank account?

To reactivate an inoperative account, the RBI has mandated KYC( Know Your Customer) process for activation of inoperative accounts and unclaimed deposits at all branches (including non-home branches) and through Video-Customer Identification Process (V-CIP) if requested by the account holder, and is subjected to availability. To strengthen this process further, a necessary second level of authorisation by another officer would be required while the customer would be intimated via registered contacts, the RBI said.