Revised RBI Guidelines on Inoperative Accounts and Unclaimed Deposits

The Reserve Bank of India (RBI) has issued revised guidelines regarding the classification of accounts and deposits as inoperative accounts and unclaimed deposits by banks.

Here’s a breakdown

What Constitutes an Inoperative Account?

• An account becomes inoperative if there are no ‘customer induced transactions’ for over two years.
• Customer induced transactions include financial transactions initiated by the account holder, non-financial transactions, or KYC updates.
• Approximately Rs 1-1.30 lakh crore is estimated to be lying in inoperative bank accounts.

Defining Unclaimed Deposits

• Balances in savings or current accounts not operated for 10 years or term deposits not claimed within 10 years from maturity are classified as unclaimed deposits.
• The government reported unclaimed deposits of Rs 42,270 crore as of March 2023.

Revised Guidelines by RBI

• Banks must conduct an annual review for accounts with no customer induced transactions for over a year.
• For term deposits, banks need to review accounts if proceeds are not withdrawn after maturity to prevent them from becoming unclaimed.
• Communication to account holders should be done via letters, emails, or SMS about inactivity and the need for KYC updates.

Classification Criteria for Inoperative Accounts

• Only customer induced transactions are considered for classifying an account as inoperative.
• Bank induced transactions such as charges and fees are not included.
• Accounts opened for government schemes or scholarships should be segregated in the CBS to exempt them from inactivity stipulations.

Reactivation Process

• KYC updates can reactivate inoperative accounts and unclaimed deposits.
• Banks must provide KYC updation facilities at all branches and through V-CIP if requested.
• No charges should be levied for the activation of inoperative accounts.

Penalty and Interest Policies

• Banks cannot impose penal charges for non-maintenance of minimum balances in inoperative accounts.
• Interest on savings accounts should be credited regularly regardless of the account’s operational status.