ONE of the bank customers contested bank’s action of declaring his account inoperative. In his email he has stated that despite regular credits in his savings bank account, the bank had tagged the account as dormant and disallowed operations when he presented his cheque to withdraw money from the account. Actually, he had given a mandate to the bank for crediting the interest amount earned on his Monthly Yield Account to the savings bank account. The bank continued to credit the interest portion monthly earned on the fixed deposit in his savings bank account for three years. However, there were no other operations in the savings bank account. On this basis the bank had declared the account inoperative and asked the accountholder to submit an application for allowing operations in the account. This annoyed the customer.
 In this situation, the customer is right. The bank has wrongly declared his account inoperative. As per RBI clarification, since the interest on Fixed Deposit account is credited to the savings bank account as per the mandate of the customer, the same should be treated as a customer induced transaction. As such, the account should be treated as operative account as long as the interest on Fixed Deposit account is credited to the Savings Bank account. However, this kind of savings bank account can be treated as inoperative account after two years from the date of the last credit entry of the interest on Fixed Deposit account.
 The issue of unclaimed and inoperative deposit accounts came to lime light, when a few days back, the Reserve Bank of India told banks to spruce up their act in dealing with deposit accounts which have remained inoperative and are unclaimed so far. The apex bank advised the banks to put in place a grievance redressal mechanism for quick resolution of complaints, record keeping and periodic review of such accounts. The regulator has even expressed displeasure that banks are not active enough in settling the unclaimed deposit accounts and has advised banks to find the whereabouts of the customers and their legal heirs.
 Notably, the unclaimed deposits were estimated at over Rs 1,723.24 crore in 1.03 non-operational deposit accounts in the Indian banking system lying unclaimed as in December 2010. The banks will have to publish the list of unclaimed deposit accounts inactive/inoperative accounts for 10 years or more. The banks have to put the list on their websites. In December 2008, unclaimed deposits worth Rs. 1,188 crore were lying with banks, which means the amount in these accounts has swelled up by over Rs.500 crore in just two years time.
 In view of the increase in the amount of the unclaimed deposits with banks year after year and the inherent risk associated with such deposits, there’s need from the banks’ side to play a more pro-active role in finding the whereabouts of the account holders whose accounts have remained inoperative.
 RBI’s displeasure over the issue of unclaimed deposits reveals the feeling that banks are undeservedly enjoying the unclaimed deposits, while paying no interest on it.
 There are certain issues which as a bank customer you must be aware of. How a bank account becomes inoperative or dormant? Once a bank account becomes inoperative, what is the procedure to make it operational? What is the procedure to withdraw money from the dormant account of a deceased account holder by his legal heirs?
 According to the Reserve Bank of India (RBI) guidelines if there are no transactions in the account for a period over two years, it is to be treated as dormant or inoperative. However, there is a hassle free mechanism in place for such accountholder to make their dormant accounts (accounts declared inoperative by the bank) operational.
 The customer has to submit a simple application requesting for making his account operational. The banks don’t have to charge any fee on activation of the inoperative account. However, the bank would allow the operation in such accounts after due diligence as per risk category of the customer. Due diligence would mean ensuring genuineness of the transaction, verification of the signature and identity etc. However, the banks have been advised by the apex bank to ensure that the customer is not subjected to inconvenience as a result of extra care taken by the bank.
 As far as the procedure to withdraw money of a deceased from his dormant account by legal heirs is concerned, there is a set procedure already in vogue in the banks where documents like death certificate, succession certificate etc are required to receive the amount on behalf of the deceased.
 Then there’s another issue of payment of interest on unclaimed deposits. As far as interest on the unclaimed deposit accounts is concerned, the Reserve Bank of India guidelines state that interest on savings bank account should be credited on a regular basis whether the account is operative or not. If a fixed deposit matures and proceeds are unpaid, the amount left unclaimed with the bank will attract savings bank rate of interest.
 Precisely, in order to arrest the increasing trend of unclaimed deposits, the banks have to make regular review of accounts in which there are no operations (i.e. no credit or debit other than crediting of periodic interest or debiting of service charges) for more than one year. The banks should approach the customers and inform them in writing that there has been no operation in their accounts and ascertain the reasons for the same. In case the non operation in the account is due to shifting of the customers from the locality, they may be asked to provide the details of the new bank accounts to which the balance in the existing account could be transferred. If the letters are returned undelivered, the banks should immediately enquire to find out the whereabouts of customers or their legal heirs in case they are deceased.
 The banks should even consider contacting the persons who had introduced the account holder. They could also consider contacting the employer / or any other person whose details are available with them. They could also consider contacting the account holder telephonically in case his telephone number / Cell number has been furnished to the bank.
 In succinct, banks have to play a more pro-active role in dealing with inoperative deposit accounts. The banks should announce a special drive to find out whereabouts of the depositors who are untraced.

(The views are of the author & not the institution he works for. Feedback: sajjadbazaz@greaterkashmir.com)

Lastupdate on : Sun, 19 Aug 2012 21:30:00 Makkah time
Lastupdate on : Sun, 19 Aug 2012 18:30:00 GMT
Lastupdate on : Mon, 20 Aug 2012 00:00:00 IST