Make the 100-day campaign work

Educate depositors about the critical role of nominations to reduce unclaimed deposits

My neighbour, an octogenarian pensioner, died a few days ago of age-related issues. When his son went to the bank, a public sector bank, to complete the claim process relating to the pension account and fixed deposits held in the bank by his deceased father, he was told that his father had not nominated anyone in his pension account. When the son asked the counter staff that since his father had been banking with them for decades, the bank should have insisted on nomination, he was told curtly that it was not their job.

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My deceased neighbour must have been either ignorant or would not have understood the importance of nomination. This is not unique to this family but typical of many of our acquaintances and thousands of other customers operating their bank accounts. The Minister of State for Finance, Bhagwat Karad, said in a written reply to the Lok Sabha in February that public sector banks (PSBs) had transferred unclaimed deposits of Rs 35,000 crore to the RBI as of February 2023. The amounts, which represented 83% of total unclaimed deposits in the banking system, were lying in 10.24 crore customer accounts. This amount, insignificant compared to the total bank deposits of Rs 180 lakh crore, reflects a lack of awareness or financial illiteracy on the part of account holders and, to some extent, the lackadaisical attitude of the PSB staff.

The Reserve Bank of India, perhaps nudged by the government, announced a ‘100 Days, 100 Pays’ campaign on May 12, 2023, under which every bank will trace and settle the top 100 unclaimed deposits in every district of the country within 100 days. The campaign kicked off in June of this year. The press release of the RBI said that the campaign will complement its ongoing efforts and initiatives to reduce the quantum of unclaimed deposits lying in the banking system and return such deposits to their rightful owners or claimants. As per the regulator’s guidelines, balances in savings or current accounts that are not operated for 10 years or term deposits not claimed within 10 years from the date of maturity are classified as “unclaimed deposits.” These amounts are transferred by banks to the Depositor Education and Awareness Fund (DEAF), maintained by the Reserve Bank of India. As the name of the fund suggests, the funds in DEAF are used for the awareness and education of depositors. From time to time, the RBI, through its public awareness initiatives, has been encouraging members of the public to identify and approach the bank concerned for such deposits.

In my neighbour’s case, the son was aware of the bank details of his father and could initiate the claim process immediately by submitting the necessary documents. But there are millions of families whose members are not aware of the bank details of the deceased individual. The deposits in such accounts languish in banks for years before getting transferred to DEAF. There are also innumerable accounts where account holders are alive, but their accounts are dormant. Likewise with the current accounts of companies, trusts, and associations that have crores of unclaimed deposits.

In many families, individuals don’t share their bank details with other members. Some individuals open accounts with many banks and spread their deposits across banks to ensure that their deposits get maximum coverage under DICGC. The solution to this problem lies in reducing the number of bank accounts; keeping track of multiple accounts becomes difficult. Depositors using net banking open FDs through net banking but don’t keep copies of the FD receipt at home, and tracing them adds to the delay in the settlement of claims.

The central bank recently announced the establishment of a centralised Web portal for the public to search for unclaimed deposits. The account holders, legal heirs, or nominees can activate their accounts or claim the amount after verifying the unclaimed deposits on their banks’ websites. Banks will refund the amount with interest to legal heirs and claim a refund from the DEAF. Banks have been advised to calculate the interest on interest-bearing deposits at the rate of 4 percent p.a. up to June 30, 2018, 3.5% with effect from July 1, 2018, up to May 10, 2021, and at 3% with effect from May 11, 2021, till the time of payment to the depositor or claimant. Unclaimed deposits in current accounts that are non-interest-bearing deposits will not earn any interest.

The solution to the problem of unclaimed deposits lies in banks insisting on nomination from prospective customers at the time of opening new accounts and in persuading existing account holders who have not opted for nomination to do so.

(The writer is a former banker and currently teaches at Manipal Academy of Global Education,Bengaluru.)