Nurture your deposit accounts

The saying goes ‘drops make an ocean’ indicating small savings over a period result into big and formidable sums. The first step in financial planning is to start saving. The savings may be through investments in different avenues like equity, debt, hybrid instruments and/ or mutual funds either in lump sum or through systematic investment plan.

Bank deposits form part of investment in debt instrument/s with pre-determined assured returns. A recent Sebi survey has indicated that 95% of the households in India prefer bank deposits as destination to park their surpluses. Reason, they afford highest safety, liquidity and stable returns. The banking system in India is well insulated by the time- tested systems and procedures laid down by the RBI as well as the government of India has infused unflinching faith in  Indians making the bank deposits as first resort investments when they have surpluses.

Investments in deposit accounts  could be in savings deposits and/or time deposits. The savings deposit as the name itself suggests is for the purpose of pooling-up savings to meet immediate financial requirements. The account is meant mainly to develop thrift of savings. Once the amount pooled in savings bank account grows into sizeable sum, a portion of it could be converted into time deposits.

The time deposit as the name goes is for investment for definite periods like 15 days to 10 years. The deposits could be made for as short a period as 15 days and as along a period as 10 years. The amount deposited could be in lump sum or built-up brick by brick. The amount invested in time deposits is withdrawable at the end of the period for which it is kept and in case of exigency prematurely with certain conditions.

Investment in savings deposits would normally fetch assured returns of 4% reckoned on daily balances maintained. Some banks pay higher rate also subject to maintaining higher average monthly/quarterly balances in the accounts. Time deposits, of course, fetch higher rates of interest and range presently from 5% to 7.5% depending upon the period of investment.


Take utmost care of deposit A/cs

It is needless to overemphasise the importance of taking utmost care of one’s deposit accounts continuously and constantly.  The reason, in case of savings deposit accounts if the account is not operated continuously and is devoid of customer or third party induced transactions for a period of one year, it is designated as an inoperative account. If the account continues to be in inactive status for a period of one more year, the same is designated as ‘dormant’ account.

The impact of designating an account as an in-operative or dormant is that one has to produce identity proof before one could withdraw the amount from that account besides presenting oneself physically in the branch. The amount cannot be withdrawn from ATMs also in case of emergency even though there is enough balance in the account which may add to one’s woes.

Some banks do have the practice of levying charges ranging from Rs 100 to Rs 500 quarterly/annually as service charges for maintaining such accounts in their books in which case there will be loss of hard earned money as a depositor.

In case of time deposits though there is no concept of inoperative account, the amount deposited may get auto rolled-over for the same period with prevailing rate of interest on the date of maturity. However, auto roll-over facility is system simulated and is not available with all the banks.

In case the auto renewal facility has not been opted by the depositor, the deposit obviously wouldn’t get rolled-over resulting in loss of interest if the same is not renewed approaching the bank personally within 14 days of maturity. However, account will earn the tag of ‘unclaimed’ if the depositor has not turned-up for over a period of 10 years.


RBI guidelines

As per RBI guidelines, if the deposit accounts remain inactive and dormant for a continuous period of 10 years, such deposit accounts have to be classified as ‘unclaimed deposits’ by the banks. The classification of accounts either as ‘dormant’ or ‘inoperative’ and ultimately as ‘unclaimed’ is with view to ensure that the amounts are not withdrawn from such accounts surreptitiously and fraudulently either from insiders or outsiders.    

RBI in 2014 advised banks to transfer the amounts lying in the deposit accounts which have not been operated for 10 years to ‘Depositors Education and Awareness Fund’ —(DEAF) maintained by them on an ongoing basis with the view to utilise such amounts for educating the customers by disseminating the banking related information to them.
 

Magnitude of unclaimed deposits

One may get wonder struck looking at the magnitude of unclaimed deposit accounts and the amount involved in it in India. It is reported that in the end of 2012, the number of accounts involved is 1.34 crore and the amount in it is staggering Rs 3,653 crore. The situation is no different even in countries like USA. The unclaimed assets including in bank deposits reportedly stood at $ 58 billion  (in terms of Rupees Rs 3,62,500 crore) as in January 2013.


Amount in unclaimed deposits could be yours

Out of huge amount lying in unclaimed deposits, a certain amount could be belonging to you or to your posterity rightly and legally. You will be poorer by the amount involved in your unclaimed deposits and /or your posterity may be deprived of it if the deposit details have not been maintained and even though maintained not passed on to them.


Think twice before you patronise many banks

Think doubly before you patronise many banks. Here are a few dos and don’ts before you open the accounts and embark on investment in bank deposits:

Dos and don’ts

Avoid opening accounts in too many banks

Operate the accounts periodically and never allow them to become inoperative

Maintain details of the accounts in a diary or note book and pass on to the right hands

Do nominations to all the accounts invariably to enable the banks to dispose-off the balance lying therein easily

Nurture your deposit accounts and enjoy your hard earned wealth or let your posterity enjoy it.

(The writer is a former banker)