There is a large amount of money lying unclaimed in such accounts. As on 31 March 2019, close to ₹25,000 crore was lying in Depositors Education and Awareness Fund (DEAF), a fund launched by the Reserve Bank of India (RBI) in 2014 for banks to park such unclaimed money. It was close to ₹7,875 crore as of March 2015.
The money transferred to the fund by various banks is invested in instruments such as government securities by a committee set up by the RBI. The income thus earned is used for paying interest on the deposits as well as using it for investor awareness and education purposes.
“The balance in DEAF has gone up on account of two things—the rise in such unclaimed money and the return earned on it," said Rama Subramaniam Gandhi, former deputy governor, RBI.
The RBI pays an interest on the deposited amount, which it keeps revising from time to time. According to the regulations, the account depositors or their legal heirs can claim the money at any time by simply furnishing the necessary documents to the bank. However, experts believe that efforts need to be made by banks to make people aware about making claims.
“We have not come across concrete initiatives taken by any bank on a large-scale basis. Ideally, there should be awareness spread through print and electronic media," said Vikas Jain, founder, Share Samadhan, a company that helps people get money from unclaimed investments.
Let’s first understand how the money ends up in the DEAF account, as well as how you can claim it back.
According to the RBI regulations, if a bank account remains inoperative for a period of 10 years, the money can be transferred to DEAF. An account is considered dormant or inoperative if there has been no transaction (apart from interest credited or maintenance fees charged) for a period of two years. Inoperative accounts also include your fixed deposits (FDs), recurring deposits, demand draft, banker’s cheques, pay orders and unadjusted National Electronic Fund Transfer transactions. The bank is required to contact the customer via e-mail or phone about this. “Banks are often unable to contact account holders as they don’t update their contact details," said Gandhi.
If the bank account still remains inoperative, the bank is required to transfer the money to the DEAF account by the end of the subsequent month along with the interest accrued. “The unclaimed money will earn interest at rates specified by the RBI and not the rate at which the deposit was made," said Gandhi. RBI generally pays an interest that is closer to savings bank account rate. So, if you had an FD with the bank, you will earn an interest of 3.5% per annum (current rate specified by the RBI) and not the FD interest rate, after it is classified as unclaimed money.
CLAIMING THE MONEY BACK
As per the RBI regulations, every bank is required to show the details of unclaimed accounts on the bank’s website. After checking the details on the website, you can visit the bank branch with a duly filled claim form, receipts of the deposits and know your customer (KYC) documents to claim the money.
“If you are the claimant, you need to visit the branch. Earlier, you would have had to go to the particular branch with which you had made the deposit but now with core banking, you can approach any branch," said Jain. However, if the claim is related to an old account (when digital banking was not enabled), you may face difficulties. “In those cases, it is advisable to visit your home branch," said Jain. If you are the legal heir or nominee, you need to approach the bank with the deposit receipts, identity proof and a copy of the death certificate of the account holder. After verifying the genuineness of the claim, the bank will release the payment.
After the bank makes the payment to the customer, it will lodge a claim with the RBI at the end of the month to get a refund from the DEAF account.
After the customer makes the claim, the account can be revived and made operative. In case the legal heir or nominee made the claim, the bank will start the account settlement process, for which there are no charges.
It is important that you always maintain records of your investments and liabilities. “The rising number of unclaimed assets with banks only proves that people are failing to communicate effectively to their near and dear ones what they own or owe. It is very important to record all your investment details," said Anirudha Taparia, executive director, IIFL Wealth and Asset Management.
“Make at least two people aware of your investments. One can be an immediate family member and the other can be someone who does not stay under the same roof; so that in case of a mishap, the other person can ensure that the money goes to the right people," said Jain.
You put in a lot of hard work to earn money. Make sure it is put to the right use and goes into the right hands after you.