The Reserve Bank of India has asked banks to annually review accounts that have not seen customer-induced transactions for over a year, and term deposit accounts where there is no explicit renewal mandate and the funds have not been withdrawn after maturity.

It also barred banks from levyingpenal charges for non-maintenance ofminimum balancein anyaccount classified as inoperative or for activation of inoperative accounts.

The instructions are part of fresh guidelines for inoperative accounts and unclaimed deposits with the aim of reducing the quantum of unclaimed deposits and frauds and improving grievance redressal.

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Revised framework

The revised framework follows a review by the central bank and includes measures to be put in place by bankson classification of such accounts, their periodic review, ways to prevent fraud, expedite grievance redress, trace account holders or their nominees/heirs, claims settlement, and the account closure process.

The guidelines are applicable to all commercial and co-operative banks and will come into effect from April 1, 2024.However, they will not be applicable for zero-balance accounts opened for credit of scholarship amount or Direct Benefit Transfer under Central and State government schemes.

Under the new framework, banks will be required to inform accountand deposit holders through letters, email or on their registered number that there has been no activity in the last one year, and caution them that the account wouldbecome ‘inoperative’ if no operations are carried out during the ‘extended period’ of the next one year.

“The classification of an account as inoperative shall be for a particular account of the customer and not with reference to the customer,” the central bank said, adding that in case of multiple accounts of a single customer each account/deposit will need to be assessed individually.

In case of unresponsive customers, banks will need to enquire into the whereabouts of account-holders or nominees/heirs. Inoperative accounts may also later be reactived subject to fresh KYC documentation and a second level of authorisation.

To reduce frauds

To reduce the risk of fraud, banks will need to regularly monitor inoperative accounts, which have been reactivated,for at least six months, without the knowledge and notice of thecustomers and the dealing staffand maintain system logs.

They will also need to ensure that inoperativeand reactivatedaccounts/unclaimeddeposits are subjected toconcurrent audit.Further, banks may also consider imposing a cooling-off periodon reactivation, with restrictions on the number and amount of transactions.

Banks will also need to display details of unclaimed deposits, which have been transferred to the RBI-maintained Depositor Education and Awareness Fund(DEA), on a monthly basis on their websitesor branches.

They will also need to provide information on the process for activation of the inoperative account/ unclaimeddeposits and claiming the balances therein.

Currently, the credit balance in any deposit account that has been inoperative for at least 10 years, or any amount that has been unclaimed for 10 years, is required to be transferred by banks to the DEA Fund.