RBI’s guidelines on inoperative accounts and unclaimed deposit

News excerpt:

The Reserve Bank of India (RBI) has updated guidelines on inoperative accounts and unclaimed deposits, targeting accounts with no customer-induced transactions.

More details on news:

  •  The RBI has revised guidelines for classifying accounts and deposits as inoperative accounts and unclaimed deposits by banks.
    •  Inoperative accounts: A savings or current account is treated as inoperative, if there are no ‘customer induced transactions’ in the account for a period of over two years.
    • Unclaimed deposits: Balances in savings / current accounts which are not operated for 10 years, or term deposits not claimed within 10 years from date of maturity are classified as ‘unclaimed deposits’.
  •  Exemptions are granted for zero-balance accounts linked to government schemes or scholarships. Reactivation is possible through know your customer (KYC) submission at any branch or via video-customer identification.
  • No charges can be levied for reactivating accounts, and there are no penalties for non-maintenance of minimum balances. The RBI ensures that interest on savings accounts will be credited regularly, regardless of the account's operational status.

Categorisation of  Direct Benefit Transfer (DBT) under Government Schemes accounts 

  •  Beneficiaries of State and Central government programs as well as scholarship students can create zero balance accounts with the banks.
  •  These accounts are also categorised as inoperative since they have not been used for two years.
  •  In order to prevent the specification of "inoperative" accounts being applied to these accounts since they have not been operated for more than two years, the banks must separate the aforementioned accounts in their Core Banking System (CBS) according to the reason for account opening.

Why did RBI issue these guidelines?

  • This move comes after the RBI launched the “100 Days 100 Pays" campaign, under which banks must trace and settle the top 100 unclaimed deposits of every bank in every district. 
    • The deadline for the scheme, which was to end on 8 September, 2023, has now been extended to 1 April 2024.
  • The move aims to streamline account classification, enhance communication with customers, and facilitate hassle-free reactivation while safeguarding customers from unnecessary charges.

Know your customer (KYC)

  • Know your customer (KYC) is a mandatory verification procedure carried out by financial institutions with the goal of minimizing illegal activities.
  •  The RBI has prohibited individuals to open a bank account, trading account or demat account without fulfilling the KYC procedure for KYC.

Zero-balance account

  • A zero-balance account refers to a savings bank account, which has a zero balance in it and yet not charged.
  • It is legally known as a Basic Savings Bank Deposit (BSBD) account as per the Reserve Bank of India (RBI) guideline. The facility is provided by banks to encourage more savings among people.

Core Banking Solution (CBS)

  •  It is the networking of bank branches, which allows customers to manage their accounts, and use various banking facilities from any part of the world.
  •  In simple terms, there is no need to visit one’s own branch to do banking transactions. A person can do it from any location, any time
    • The customer enjoys banking services from any branch of the bank that is on the CBS network, regardless of the branch where he has opened his account.
  •  For the bank which implements CBS, the customer becomes the bank’s customer instead of the customer of a particular branch.

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