Further clarifying the issue RBI says “for the purpose of classigying an account as ‘Inoperartive’ both the type of transactions i.e., debit as well as credit transactions induced at the instance of customers as well as third party should not be considered . However, when the interest on Fixed Deposit account is credited to the Saving Bank accounts as per the mandate of the customer, it is treated as a customer induced transaction. However , it may be mentioned that some banks had certain internal guidelines/periods before an account can be termed as dormant and / or inoperative. Bankers needs to check their internal circulars for this purpose, but the above period of two years is applicable as per RBI guidelines. Therefore, as per RBI guideline, there is no difference between dormant account s and inoperative accounts.
What is the Background for creation of different class of accounts under the head of dormant or inoperative ?
Section 26 of the Banking Regulation Act, 1949 provide, inter alia, that every banking company shall, within 30 days after close of each calendar year submit a return in the prescribed groom and manner to the Reserve Bank of India as at the end of each calendar year (i.e., 31st December) of all accounts in India which have not been operated upon for 10 years. Such deposits are considered as unclaimed deposits. Thus, banks were complying with these guidelines. Slowly, the amount of unclaimed deposits has increased to a level which came to severe criticism in the media and some other reports. To check this trend , RBI has initiated a move and wanted banks to play a pro-active role so that unclaimed deposits can be nipped in the bud itself. Thus, it has issued certain guidelines to banks as to how to monitor such dormant and inoperative accounts.
What are the Rules for banks for monitoring of Dormant/Inoperative Accounts ?Is Bank Required to inform customer about his account becoming dormant /Inoperative ?
In terms of RBI guidelines, banks are required to make an annual review of accounts in which there are no operations(i.e.,no credit or debit other that crediting of periodic interest or debiting of service charges ) for more than one year. In case there have no “transactions” , the bank is require to inform the account holder to activate the account by putting through any single debit or credit transaction which can also be put through a third party. If the account is still not activated and no reply is received, the bank will classify the account ass dormant at the end of two years from the date of last transaction.RBI has also specified the procedure to be followed in case the letter sent is returned back. However, where the account holder replies and gives the reasons for not operating the account, bank will continue classifying the same as an operative account for one more year within which period the account holder can operate the account. However , if the account holder still does not operate the same during the extended period, the account will be classified as Inoperative at the end of the extended period . Interest on savings bank accounts should be credited on regular basis whether the account is operative or not. Banks are also advised to ensure that the amounts lying in Inoperative accounts ledger are properly audited by the internal auditors/statutory auditors of the bank.
What is purpose behind classifying the account as dormant or inoperative?
The purpose for segregation of inoperative accounts is to reduce the risk of frauds etc. The classification is done merely to bring the attention of dealing staff about the increased account in such an account. Thus, transactions in such accounts may be monitored at a higher level both from the point of view of preventing fraud and making a Suspicious Transactions Report. However, The entire process remains un-noticeable by the customer.
Can a customer issue a cheque on dormant account ?
Yes. However, the bank is expected to exercise due diligence as to the genuineness of the transaction, verification of the signature, identify etc., and use its discretion while making payment of such cheques .
Can Bank Charge for account remaining as dormant?
Yes. Bank can charge as per the schedule of charges declared by the bank. Can bank charge for reactivating the same i.e. making the account again an active account? However, banks cannot charge any fee / charges for converting a dormant/Inoperative account as operative.
What are the guidelines for unclaimed accounts?
We have already explained about unclaimed deposits. Banks are now supposed to play a more pro-active role in finding the where bouts of the accountholders of unclaimed deposits/inoperative accounts. RBI has advised banks that they should display the list of unclaimed deposits/inoperative accounts which are inactive/ inoperative for ten years or more on their respective websites. The list so displayed on the websites must contain only the names of the account holder(s) and his/her address in respect of unclaimed deposits/ inoperative accounts. In case such accounts are not in the name of individuals, the names of individuals authorized to operate the accounts should also be indicated. However, the account number, its type and the name of the branch shall not disclose on the bank’s website. The list so published by the banks should also provide a “Find “option to enable the public to search the list of accounts by name of the account holder. Banks should also give on the same website, the information on the process of claiming the unclaimed deposit/activating the inoperative account and the necessary forms and documents for claiming the same. Banks are required to have adequate operational safeguards to ensure that the claimants are genuine.