RBI’s Revised Guidelines for Customers with Inoperative and Unclaimed Accounts

Source– This post is based on the article “Inoperative & unclaimed accounts: How will the RBI’s revised guidelines benefit customers?” published in “The Indian Express” on 3rd January 2024.

Why in the News?

The Reserve Bank of India (RBI) has revised guidelines for classifying accounts and deposits as inoperative accounts and unclaimed deposits by banks.

What are the Revised Guidelines?

1) Annual review– The RBI has instructed banks to conduct an annual review for accounts with no customer-initiated transactions for over a year.

2) Alert messages- Banks should notify account holders via letters, email, or SMS if there has been no activity in their accounts in the past year. The message should mention that the account would become ‘inoperative’ if no operations are carried out during the next one year

3) Account which can be classified as inoperative- To classify an account as inoperative, only transactions initiated by the customer will be taken into account, excluding those initiated by the bank.
Note- Bank-induced transactions are transactions in the account initiated by the bank such as charges, fees, interest payments, penalties and taxes.

4) Accounts cannot be classified as inoperative accounts– The stipulation of ‘inoperative’ accounts is not applicable on zero balance accounts for beneficiaries of Central/State government schemes and for students who receive scholarships.

5) The classification of an account as inoperative will only be for a particular account of the customer and not with reference to the customer.

6) Inoperative accounts reactivation- The RBI has instructed banks to offer KYC updation for activating inoperative accounts and unclaimed deposits at all branches, including non-home branches. No charges should be levied for activation of inoperative accounts.

7) Banks cannot impose penalties for not maintaining minimum balances in accounts classified as inoperative.

8) Interest on savings accounts should be regularly credited, regardless of the account’s operational status.

What are Inoperative Accounts and Unclaimed Deposits?

1) 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.

2) Unclaimed deposits on the other hand are those savings/ current accounts with no activity for 10 years or term deposits unclaimed for a decade after maturity