A deposit is classified as unclaimed when a customer hasn’t made any transaction in the account for 10 years or more. Unclaimed deposits include funds in current and savings accounts as well as term deposits.
Unclaimed deposits are transferred to the Depositor Education and Awareness (DEA) Fund, where it is invested in instruments such as government securities.
RBI Guidelines
The Reserve Bank of India (RBI) has recently given out new rules for banks on how to handle inactive accounts and unclaimed deposits. These guidelines cover things like regularly checking these accounts, preventing fraud, resolving complaints quickly and finding the customers or their heirs for reactivating, settling claims, or closing accounts.
According to the latest rules, banks must conduct a yearly check on accounts with no customer transactions for over a year. If term deposits are not explicitly renewed, banks should review them, especially if customers haven't withdrawn the money after maturity or transferred it to their savings or current accounts, to avoid the deposits becoming unclaimed.
The RBI also mentioned that banks should not label zero balance accounts as 'inoperative' unless they stay inactive for more than two years. This is because both the central and state governments face challenges in depositing cheques, Direct Benefit Transfers, Electronic Benefit Transfers, or scholarship amounts into these accounts when they are deemed inoperative after two years of non-use.
How Can You Check Your Unclaimed Funds
The RBI has mandated banks to publish a list of inactive or inoperative accounts for 10 years or more on the bank’s website.
The first step is to check the inactive account details. If you are the account holder yourself, you would need to submit the unclaimed deposits claim form along with a valid identity and address proof document.
If you are the legal heir, you will need to submit the death certificate along with the unclaimed deposits claim form and identity and address proof.
Note that you will need to provide the originals to the bank for scrutiny.
The bank will review the claim and once approved, it will follow the usual claim settlement process. The total amount payable will include the unclaimed amount plus the accumulated interest paid by that specific bank.
According to reports, the Department of Economic Affairs (DEA) holds unclaimed deposits to the tune of more than Rs 42,000 cr. The primary reason for unclaimed deposits is that often the dependents of the account holder do not know of the investment.
The importance of informing your dependents, especially your nominee or heir, about your financials cannot be stressed enough. Make sure they know exactly what your investments and insurance are, and how to access the required documentation if and when required.
Avoiding Unclaimed Deposits
Nomination Addition: To prevent deposits from being labelled as unclaimed, consider adding nominees to your bank accounts. Nominating individuals who would inherit the funds in case of your demise ensures a smooth process, allowing rightful beneficiaries prompt access without unnecessary complications.
Sharing Details With Family: Openly communicate your bank account and deposit details with family members. This transparency equips your loved ones to manage these accounts effectively in unforeseen circumstances, significantly reducing the risk of funds being categorized as unclaimed.
KYC Updation: Regularly update your KYC details with the bank. Apart from meeting regulatory requirements, this prudent measure ensures accurate and up-to-date information, facilitating seamless communication between you or your nominees and the bank, and preventing deposits from becoming unclaimed.
Closing Extra Accounts: Periodically review your accounts and close redundant ones to reduce the risk of funds becoming unclaimed. Consolidating funds into a few active accounts simplifies financial management and minimizes the chances of any account falling into the unclaimed category.
Safekeeping FD Slips: When investing in fixed deposits (FDs), store FD slips securely. These documents serve as evidence of your investments and are crucial for nominees or beneficiaries to claim funds. Keeping family members informed about the whereabouts of these slips ensures a smooth process if the FD needs to be claimed.
By proactively taking these measures, you safeguard your deposits, ensuring accessibility and benefits for you and your family. Regularly reviewing and updating financial information, sharing it with trusted family members, and adhering to regulatory requirements form a comprehensive approach to prevent deposits from being classified as unclaimed.
