RBI mandates yearly assessment of inactive bank accounts in India

The Reserve Bank of India (RBI) has recently issued guidelines for banks to conduct annual reviews of accounts that have been inactive for over a year. This directive is part of a comprehensive set of guidelines on unclaimed deposits and inoperative accounts. Specifically, the RBI has asked banks to focus on accounts where there have been no customer-induced transactions for more than a year, including term deposit accounts that have no explicit renewal mandate and where customers have not withdrawn the proceeds post-maturity.

The new instructions, set to take effect from April 1, 2024, aim to address the issue of unclaimed deposits in the banking system and ensure that these funds are returned to their rightful owners or claimants. The RBI’s notification clarifies that only customer-induced transactions are relevant for determining if an account is inactive. This includes financial transactions like ATM withdrawals or deposits, RTGS/NEFT transactions, debit card transactions, non-financial activities such as requests for cheque books or debit cards, changes in transaction limits, or KYC updates.

Banks are instructed to proactively reach out to account holders of such inactive accounts through written communication, emails, or SMS. These messages will inform them about the inactivity and the need to perform some operation to prevent their accounts from becoming inoperative. Additionally, banks will be required to conduct inquiries to locate account holders or their nominees, especially in cases where the account holder is deceased.

The RBI’s guidelines also state that standing instructions or auto-renewal instructions will be considered as customer-induced transactions. Each account of a customer will be evaluated individually, even if the customer holds multiple accounts with the bank. The purpose of these measures is to reduce the risk of fraud and ensure the proper management of unclaimed deposits.

In cases where accounts remain inoperative due to the primary account being shifted to another bank, account holders may be asked to provide details of their new account. Additionally, the RBI has specified that accounts opened for government scheme benefits, like scholarship amounts or direct benefit transfers, will be treated differently. Such accounts will be segregated in the core banking solution, and the standard ‘inoperative’ account rules will not apply if they are non-operational for over two years.

The RBI emphasizes that these measures are intended to enhance the safety and security of the banking system, reduce fraud, and ensure that customers’ funds are adequately protected and managed.

These changes reflect the RBI’s ongoing commitment to safeguard the interests of bank customers and enhance the operational efficiency of the banking system in India.



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