India has more than ₹35,000 crore lying unclaimed in 10.24 crore accounts (both savings as well as fixed and other deposits) in 12 public sector commercial banks across the country.
State Bank of India has the maximum unclaimed deposits of ₹8,086 crore in 2.17 crore accounts, followed by Punjab National Bank which has 1.50 crore accounts worth ₹5,340 crore unclaimed, as per the Reserve Bank of India (RBI) data at the end of February, 2023.
Unclaimed deposits are defined as those lying in accounts not operated for a period of 10 or more years. Section 26 of the Banking Regulation Act, 1949 requires banks to submit information to the RBI 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 the RBI.
However, the common man, including those who are educated, 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.
"The National most important reason for a deposit account becoming unclaimed is the death of the depositor without a nomination, or without being a joint account, or without the ‘either or survivor’ option," said a branch manager of Punjab Bank. He says in most cases the amount in an account remains unclaimed due to ignorance of the account holder.
"In many cases, the account holder or the person nominated does not bother to inform the concerned bank branch about the passing away of the account owner. In the case of such accounts, banks are required to follow the legal procedures before handing over the money to the legal heirs," adds the PNB manager.
As per Section 26A of the Banking Regulation Act, 1949, money lying in dormant bank accounts is transferred to the Depositor Education and Awareness Fund (DEAF) within three months from the expiry of 10 years.
The depositor can claim from the bank, deposits or any other unclaimed amount or operate the account after the expiry of 10 years, even after such amount has been transferred to the DEAF. The bank is liable to pay the amount to the depositor/claimant and claim refund of such amount from the DEAF.
The growth of amount outstanding was steeper than that of accounts, implying that increasing number of relatively large deposit accounts was becoming unclaimed, a matter of concern.
The average amount outstanding per account increased by 35.2% from ₹2,215 in 2011 to ₹2,995 in 2020 after a peak of ₹3,521 in 2013. The savings bank portfolio had the highest incidence of unclaimed deposits — three-fourths of the total unclaimed accounts and two-thirds of the total amount.
“SBI has informed that it assists the family of the deceased in settling all cases of claims. Settlement of accounts of the deceased constituent are taken up on priority by SBI and its staff has been sensitised, and instructions are reiterated in all forums of banks at a regular frequency,” says a Chennai-based SBI branch manager.
For the convenience of the customers, the details and process of settlement of claims without legal representation in respect of accounts of deceased constituents, the specimen
of prescribed forms have been uploaded on SBI’s website, the manager said.
"Every application for settlement of accounts of a deceased constituent received at the SBI branch is duly acknowledged. If the documents are incomplete or not in order, or the claim is rejected, the same is duly recorded along with reasons thereof, under advice to the claimants," said the official.
As per instructions issued by RBI to scheduled commercial banks, banks are required to make an annual review of accounts in which there are no operations for more than one year, and may approach the customers and inform them in writing that there has been no
operation in their accounts and ascertain the reasons for the same.
Banks have also been advised to consider launching a special drive for finding the whereabouts of the customers/legal heirs in respect of accounts which have become inoperative, i.e., where there are no transactions in the account over a
period of two years.
Further, banks are required to display the list of unclaimed deposits/inoperative accounts which are inactive/inoperative for ten years or more on their respective websites, with the list containing the names and addresses of the account holder(s) in respect of unclaimed deposits/inoperative accounts.
Finally, banks have been advised by the RBI to play a more pro-active role in finding the whereabouts of the account holders whose accounts have remained inoperative.
"I forgot to inform the bank about the death of my mother who has nominated me in the savings bank account. A nominal amount was lying in the account and due to work pressure, I did not bother to claim it. But after several reminders from the bank, I got all documents like death certificate, legal heir certificate etc and withdrew the money," said M Aashish, an IT engineer.
According to bank officials, in many cases even now, the account holders don’t nominate anyone and this makes it difficult for the son or daughter to withdraw the amount lying in that account after the death of the account holder. "It is very difficult if there is no nomination mentioned in the bank accounts. As after the death of the account holder, those who claim the amount lying, the legal procedures are cumbersome and consume considerable time," said Aashish.
"There are also many cases where the account holder is very much alive but has migrated to other countries. In such cases also money is lying in various accounts," said the PNB manager.
Financial illiteracy and lack of awareness about the procedures among the people lead to these kinds of situations. Banks must conduct financial literacy drives frequently. While opening accounts, banks must ensure that customers fill in the nomination part in account opening forms appropriately and completely.
"We are planning to organise area-wise special camps for revival or disposal of unclaimed accounts. Monitoring the status of unclaimed deposits in customer grievance redressal meetings at various levels, is also another solution," the manager said.