Recently, a user posted on a social media group about the difficulty in understanding how to claim his grandfather’s unclaimed deposits at various bank accounts.
“My grandfather passed away recently and kept little to no records about his investments, bank accounts, and others. As a result, we are facing great difficulty in tracking these accounts and claiming back the deposits and investments,” he wrote on his social media account.
When Do Bank Accounts Get Tagged As In-Active Or Dormant?
The user who posted this query had no idea that his grandfather had so many banks and investment accounts in different companies. Often times, this is one of the primary reasons behind a user not transacting in his accounts – forgetfulness.
Puneet Kapoor, president-products, alternate channels and customer experience delivery, Kotak Mahindra Bank, says that under the RBI’s guidelines, only savings and current accounts, and not fixed deposit and recurring deposit accounts come under the ambit of dormancy. “However, even after a savings account turns inactive and dormant, the customer continues to earn simple interest on the account,” he says.
Kapoor adds: “If a customer has not initiated a transaction in the account for over a period of two years, then with a view to protect the customer’s deposits, the account gets classified as inoperative, and the operation in such accounts is then allowed only after due diligence, which includes, among others, ensuring the genuineness of the transaction, verification of customer identity, and signature.”
Does Having A Nomination Help?
The user who posted this query had no knowledge of his grandfather’s accounts, but there may be other reasons, such as non-updating the current address, or lack of nominee address and details, and so on, for savings or current account getting tagged as dormant. Adding key attributes of a nominee helps the financial institution to track down the family members after the death of the primary accountholder.
Kapoor says that in the unfortunate event of death of an accountholder, the nominee has to intimate the bank of the same by visiting the nearest branch and providing the following documents:
- Death certificate issued by municipal authorities/government department
- Identification and address proof (any one of these – passport, driving licence, Aadhaar, voter ID) of the nominee
“As soon as the documents are verified by the bank, the balance outstanding at the time of the depositor’s demise will be paid to the nominee,” he adds.
Ashish Misra, COO, Retail Banking, Fincare Small Finance Bank says that users should note that “funds are not transferred automatically to the nominee’s account (in case of death of the accountholder). If the depositor has registered a nomination with the bank, the balance outstanding in the account of the deceased depositor shall be transferred to the account of/paid to the nominee, after the necessary verification of certain documents (death certificate, nominee identity, some other declarations)
“The procedure is followed even in the case of a joint account, where the nomination is registered with the bank,” adds Misra.
What If There Was No Nomination Filed In The Account?
Filing of nomination is a very important process in financial matters. Recently, the Securities and Exchange Board of India (Sebi) has also decided to bring in uniformity of nomination for investments.
Misra says that that banking procedures need to be followed where the accountholder has not mentioned any nominee.
“In the absence of nomination, and when there are no disputes among the claimants, the bank shall pay the amount outstanding in the account of the deceased accountholder against joint application and indemnity by all legal heirs, or the person mandated by the legal heirs to receive the payment on their behalf without insisting on legal documents, and up to the limit approved by the bank’s board,” he says.
According to Misra, the procedure was made so as to ensure that a common depositor does not face hardships on account of delays in completing the legal formalities.
When Does RBI's DEAF Regulation Kick In, And What To Do Then?
Incidentally, the accumulated fund in the Reserve Bank of India’s (RBI) Depositor Education and Awareness Fund (DEAF) account is something to the tune of Rs 39,264 crore. This has mostly been accumulated from unclaimed accounts in dormant banks throughout India.
Misra says “Under the Depositor Education and Awareness Fund (DEAF) scheme, the credit of any account in India with any bank that has not been operated for 10 years, or any deposit or any amount remaining unclaimed for more than 10 years, has to be credited to the fund within three months from the expiry of 10 years. The fund is to be used for the promotion of depositors’ interest and other purposes, as specified by the RBI.”
According to Kapoor, if the balance in the inoperative bank accounts remain unclaimed for 10 years or more, banks will transfer the proceeds into DEAF, but “the customer can approach the bank in case he/she wants to claim the said amount (in DEAF).”
Misra says that the RBI’s DEAF regulations were first announced in the annual monetary policy in 2013 “with a view to use unclaimed deposits lying with banks for depositor’s education and awareness.”
He further says that according to an RBI circular dated May 27, 2014, “banks shall transfer to the fund, the amounts becoming due in each calendar month as specified in the Scheme, and the interest accrued thereon, on the last working day of the subsequent month.”
Also, according to an RBI circular dated May 11, 2021, this balance in DEAF will earn a simple interest at 3 per cent, fixed by the RBI.
“Accordingly, all the banks are advised to calculate the interest payable on interest-bearing deposits transferred to the RBI at the rate of 4 per cent p.a. up to June 30, 2018, and 3.5 per cent with effect from July 1, 2018, up to May 10, 2021, and at 3 per cent with effect from May 11, 2021, till the time of payment to the depositor/claimant,” the RBI circular said.
