Unclaimed bank deposits swell to Rs 913 cr

Some customers deposit money in banks and never withdraw it. The reasons could be many "" ranging from the death of the customer to disputes and even pure amnesia.

Believe it or not, the unclaimed deposit kitty of the banking sector is Rs 913.40 crore as on December 2003. It has risen by over 34 per cent last year from Rs 679.98 crore in December 2002.

Public sector banks, which account for the largest chunk of the banking industry, have unclaimed deposits of around Rs 815.85 crore. The private sector banks have a small pile of unclaimed deposits "" Rs 52.07 crore and foreign banks Rs 45.48 crore.

Surprisingly, savings bank accounts have the largest share of unclaimed deposits "" Rs 592.05 crore. In contrast, only Rs 70.41 crore worth of current accounts are unclaimed. The unclaimed fixed deposits are Rs 183.12 crore. This essentially means individuals have left more money unclaimed in the banking system than corporations.

What do the banks do with the unclaimed deposits? Well, those deposits which are not claimed for 10 years are transferred from the branches to the respective bank's headquarters. After lying there for five years, the money travels to the Reserve Bank of India (RBI).

However, in most of the cases the banks refrain from transferring the unclaimed deposit to the RBI, say industry sources. A general manager from a leading public sector bank says the banks should be allowed to use the corpus of the unclaimed deposits to provide for non-performing assets.

The RBI, in a notification in 2002, had given banks the freedom to decide if they would want to renew unclaimed term deposits and service these accounts. Since then most banks have adopted a procedure of automatic renewal of term deposits on maturity.

This helps banks make accurate provisioning for interest so that there is no unexpected hit on the interest outflow in terms of arrears, says a banker. Most banks retain these unclaimed deposits in their overdue accounts.