At December-end 2019, there were Rs.18,380 crore unclaimed deposits outstanding against 641.4 lakh accounts in the banking sector, returning an average of Rs.2,866 per account. It is only through meaningful cooperation between banks and customers that the incidence of unclaimed deposits can be minimized.
By Dr Manas R Das
This is a little known story, but many common men, including several learned ones, are afflicted by this phenomenon in the banking industry. Therefore, there is a need to make people aware of this.
Unclaimed deposits are commonly defined as those deposits which are lying in accounts not operated for a period of ten or more years. RBI requires banks to submit to it information as to these accounts at the end of every calendar year.
At December-end 2019, there were Rs.18,380 crore unclaimed deposits outstanding against 641.4 lakh accounts in the banking sector, returning an average of Rs.2,866 per account.
The most important reason for a deposit becoming unclaimed is the death of the depositor without a nomination, or without being a joint account with ‘either or survivor’ option. This arises mostly due to the ignorance of the account holder at the time of opening the account, or even if he comes to know afterwards, he does not carry out the necessary modifications by taking the pains of visiting the bank branch. In the case of such accounts, banks have to follow the legal procedures before handing over the money to the legal heirs. Here also the onus lies with the deceased depositor’s legal heirs who have to initiate the process with the bank. However, as everybody knows legal procedures are cumbersome and do take considerable time.
Financial illiteracy and lack of awareness about the bank procedures among people leads to the above-mentioned kinds of situations.
Sometimes banks themselves are not too enthusiastic about identifying the unclaimed accounts and following up with the account holders or their legal heirs.
The primary solution to reduce the incidence of unclaimed deposits lies with banks. While opening the accounts, they have to see that the customers fill up the account opening forms appropriately and completely. Account opening procedures have no doubt been made more elaborate particularly after the KYC norms have been introduced. However, it is more for the benefit of the customers than the banks. Therefore, it is in their own interest that the customers should cooperate with the banks. In recent times, there are positive shifts being observed in this respect.
Second, bankers, while opening the accounts, must explain to the customers, particularly those who are not bank-savvy, the why’s of certain information being asked. It is only then the customers will become more aware of his duties and responsibilities, and they will be convinced about complying with the procedures.
Third, the power of technology, especially mobile and Internet banking, must be harnessed in updating from time to time the customer details at the banks and establishing regular contact with the customers. Customers who have access to these technologies should also on their own update their profiles with the banks.
Unclaimed deposits may constitute a minuscule proportion of total deposits of a bank, but the banks, particularly the public sector banks, are wedded to the cause of serving the common man and therefore, they have to take initiatives in reducing the incidence of unclaimed accounts. Some of these initiatives could be as under:
- Organizing area-wise special camps for revival of unclaimed accounts.
- Revealing the position of unclaimed deposits in the ‘Notes to the Accounts’ of their balance sheets.
- Monitoring the position of unclaimed deposits in their customer grievance redressal meetings at various levels.
- Business Correspondents appointed by banks should help in establishing contact with the holders of unclaimed deposits or their legal heirs and try to reactivate the accounts.
Legal procedures for settlement of unclaimed accounts should be made more customer-friendly, particularly for the low-value unclaimed deposits.
RBI has been doing a good job in persuading banks to reduce unclaimed deposits. However, a few more things, as mentioned below, may be undertaken:
- RBI should ask banks to make available population group-wise (i.e., Rural/Semi-urban/Urban/Metro) data so that banks can also focus on the issue of unclaimed deposits more pointedly
- RBI should comment upon the position of unclaimed deposits while carrying out on-site inspections of the banks and
- RBI’s Customer Service Department should monitor the position of unclaimed deposits in banks directly.
In all, it is only through meaningful cooperation between banks and customers that the incidence of unclaimed deposits can be minimized.
About the Author:
Dr. Manas R. Das is a former senior economist of State Bank of India. He has over 30 years of experience as an economist in two large commercial banks. Academically, he is a gold medallist in Bachelor of Arts with Economics Honours from Utkal University, followed by Master’s in Economics from Delhi School of Economics and Doctorate in Economics from Gokhale Institute of Politics and Economics. He is also a Certified Associate of Indian Institute of Bankers. He has won several awards, besides being a prolific writer.