Context: RBI has released guidelines for classifying accounts and deposits into inoperative accounts and unclaimed deposits. These guidelines will be applicable on Commercial Banks (including RRBs) and all Co-operative Banks.

Importance of these guidelines for inoperative accounts and unclaimed deposits

• Reducing risk of frauds: Inoperative accounts have often been used for money laundering and committing frauds.

• Mobilising of funds parked in inoperative accounts: Around Rs 1-1.30 Lakh crores is expected to be parked in inoperative Bank accounts and Rs 42,270 crore of unclaimed deposits are lying with banks as of March 2023.

• Streamlining direct benefit transfers and scholarships from central and state governments: banks open zero balance accounts for beneficiaries of Central/State government schemes and for students who receive scholarship. Central and State governments have been expressing difficulty in crediting cheques/Direct Benefit Transfer/ Electronic Benefit Transfer/ scholarship amount in these accounts as they are also classified as inoperative due to non-operation for two years.

Inoperative Account

• A savings/current account shall be treated as inoperative if there are no ‘customer induced transactions’ in the account for a period of over two years. Thus, bank induced transactions will not be considered for classifying any account as inoperative.

Customer induced transaction is in the nature of

• Financial transaction initiated by or done at the behest of account holder by the bank/third party.

• Non-financial transaction like 

• KYC updation done in face-to-face or through digital channels. 

• Banks shall activate inoperative accounts/unclaimed deposits.

Unclaimed deposits

• The credit balance in any deposit account maintained with banks, which have not been operated upon for ten years or more, or any amount remaining unclaimed for ten years or more are required to be transferred by banks to Depositor Education and Awareness (DEA) Fund Scheme maintained by the RBI.

• Unclaimed Deposit Reference Number (UDRN): Whenever an unclaimed deposit/account is transferred by the bank to the Depositor Education & Awareness (Fund) of RBI, a unique number is generated through the Core Banking Solution and assigned to each such account known as Unclaimed Deposit Reference Number (UDRN). 

• Banks shall host the details of unclaimed deposits and UDRN, which have been transferred to DEA Fund of RBI on their respective websites, which will be updated monthly. 

Accounts opened for scholarships and direct benefit transfer under Government Schemes

• Banks shall segregate accounts opened for the above purposes in their Core Banking Solution, so that the stipulation of inoperative account is not applicable to these accounts due to their non-operation for a period of more than two years.  

Interest Payments and charges

• Interest on savings accounts shall be credited on a regular basis irrespective of the fact that the account is in operation or not.

• Banks are not permitted to levy penal charges for non-maintenance of minimum balances in any account that is classified as an inoperative account. 

Activation of inoperative accounts

• Banks shall activate inoperative accounts/unclaimed deposits, including freeze accounts only after adhering to KYC guidelines such as Customer Due Diligence, Customer identification, risk categorisation etc.

• Activation of inoperative accounts/unclaimed deposits in Core Banking Solution (CBS) will only take place second level of authorisation by another officer at the same or higher level. 

• Bank shall automatically intimate the inoperative account/unclaimed deposit holders through SMS and registered email stating that based on KYC verification and updation, the inoperative status has been removed.

• Banks shall make available the facility of updation of KYC for activation of inoperative accounts/unclaimed deposits at all branches (including non-home branches) and through Video-Customer Identification Process (V-CIP). 

• No charges shall be levied for activation of inoperative accounts.

• Transactions in inoperative accounts, which have been reactivated, shall be monitored regularly, for at least 6 years. 

Review of Accounts

• Banks shall undertake atleast an annual review of accounts, where there are no customer induced transactions for more than year.