DEALING WITH UNCLAIMED BANK DEPOSITS

Unclaimed deposits are commonly defined as those deposits which are lying in accounts not operated for a period of 10 or more years.

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Section 26 of the Banking Regulation Act, 1949 requires banks to submit to RBI information about these accounts within 30 days after each calendar year ends. Unclaimed deposits can be claimed by their legal owners after satisfying certain conditions prescribed by RBI.

However, several common citizens, including the financially sophisticated ones, are observed to be ignorant of the provisions and processes involved. This has led to proliferation of inoperative accounts and unclaimed deposits in the banking system.

As per Section 26A of the amended Banking Regulation Act, 1949, money lying in dormant bank accounts is transferred to the Depositor Education and Awareness Fund (DEAF) within a period of three months from the expiry of the above-said 10 years.

The depositor is, however, entitled to claim from the bank her/his deposit or any other unclaimed amount or operate the account after the expiry of 10 years, even after such amount has been transferred to DEAF. The bank is liable to pay the amount to the depositor/claimant and claim refund of such amount from DEAF.

The growth path of the number of unclaimed accounts and amount outstanding at December-end during the decade 2011 to 2020. During this period, both continuously increased, barring a nominal dip in 2014 in respect of the latter.

The growth of amount outstanding (CAGR=29.1 per cent) was steeper than that of accounts (CAGR=24.9 per cent), implying that increasing number of relatively large deposit accounts was becoming unclaimed, which is puzzling and a matter of concern.

Massive jump

The average amount outstanding per account increased by 35.2 per cent from Rs. 2,215 in 2011 to Rs. 2,995 in 2020 after a peak of Rs. 3,521 in 2013. The savings bank portfolio had the highest incidence of unclaimed deposits threefourth of the total unclaimed accounts and two-third of the total amount.