MC Explains | Unclaimed deposits with banks down to Rs 35,000 crore. What does it mean?

An unclaimed deposit is one which does not see any activity like infusion of funds, withdrawal, etc. from the depositor for 10 years or more, and is deemed as an inactive deposit.

After terming a deposit as an unclaimed deposit, banks have to report the number of unclaimed deposits and the amount lying in the same to the RBI.

What are the rules to tag an account as unclaimed?

There are several reasons, such as lack of awareness among depositors, death, etc. for deposits to become inactive and later unclaimed. But among these, the most crucial reason is the death of the depositor.

When a depositor opens an account without sharing details of a nominee or a survivor, the funds in the deposit, after the death of the depositor, remain with the banks.

What happens to unclaimed deposits?

After banks share the total number and amount of unclaimed deposits with RBI, the deposits are transferred to RBI's Depositor Education and Awareness Fund (DEAF).

The regulator then creates awareness campaigns aimed at informing depositors of these unclaimed deposits.

What do RBI rules say?

As per the instructions issued by RBI to banks through a July 2014 circular on Customer Service in Banks, banks are required to make an annual review of accounts in which there have been no operations for more than a year.

The banks may then approach the customers and inform them in writing that there has been no activity in their accounts and ascertain the reasons for the same.

Other than this, banks have also been advised to consider launching special awareness drives for finding the whereabouts of customers or legal heirs in respect of accounts that have become inoperative, i.e., accounts that have not seen any transactions over a period of two years.

After all of this, banks are required to display the list of unclaimed deposits or inoperative accounts which are inactive or inoperative for 10 years or more on their respective websites, with the list containing the names and addresses of the account holders in respect of unclaimed deposits or inoperative accounts.

Can a deposit holder come after 10 years to claim the deposit?

Yes, the deposit holder of an unclaimed deposit can reclaim the funds, provided, he or she proves, with documents and all paperwork that the deposit belongs to the person.

Nandkishor Desai, a former banker with State Bank of India (SBI), explained the process of reclaiming an unclaimed deposit.

"Around 20 years back, when the bank was informed of a reclaim application for an unclaimed deposit, the depositor was told to visit the nearest branch. There, after checking all the required papers, and documents of proof, the amount was transferred to the depositor," Desai said.

But now, the process has been eased thanks to the know-your-customer (KYC) norms by banks and online banking services.

How much unclaimed deposits are lying in banks?

Out of the Rs 35,012 crore total unclaimed deposits held by banks in India till February 2023, India's largest public sector bank, SBI, has the largest share of Rs 8,086 crore, followed by Punjab National Bank at Rs 5,340 crore, Canara Bank at Rs 4,558 crore and Bank of Baroda at Rs 3,904 crore.

Such deposits have declined over the year. What does this mean?

The decline in the amount simply means that customers have reclaimed their deposits from banks.

Karad also informed parliament that SBI is prioritising helping depositors reclaim their funds.

"SBI has informed that it assists the family of the deceased in settling all cases of claims. Settlement of account(s) of the deceased constituent are taken up on priority by SBI. SBI staff has been sensitised and instructions are reiterated in all forums of banks at regular frequency," said Karad in parliament.