
The Reserve Bank of India (RBI) has issued guidelines instructing banks not to classify zero balance accounts, opened for government scheme beneficiaries like direct benefit transfer (CBS), as inoperative even if there is no activity for two years.
Challenges for Government Transactions
The central and state governments faced difficulties in crediting amounts to these accounts, considering them inoperative due to non-operation for two years.
Segregation of Accounts
To address this, the RBI mandates that banks segregate these accounts in their CBS based on the purpose of opening, exempting them from the ‘inoperative’ status.
Reactivation Requirements
Customers must submit fresh KYC documents for reactivation if an account remains inactive for two years.
Unclaimed Deposits Transfer
Accounts inactive for over 10 years will have their funds transferred to the ‘Depositor Education and Awareness Fund Scheme’ by banks.
Criteria for ‘Inoperative’ Classification
The RBI clarified that only customer-induced transactions, not bank-induced, should be considered for classifying an account as ‘inoperative.’
Revised Instructions and Implementation Date
The revised instructions, effective April 1, 2024, aim to reduce unclaimed deposits and streamline account classification procedures.
Annual Review Mandate for Banks
Banks are required to conduct an annual review for accounts lacking customer-induced transactions for more than a year, especially those without explicit renewal mandates for term deposits.
Communication to Account Holders
Banks must inform account holders in writing through letters, email, or SMS (if registered) about no operations in the last year. The message must warn of potential inoperability and the need for fresh KYC documents for reactivation.
Enhanced Bulk Deposit Limits for Urban Cooperative Banks
In a separate move, the RBI raised the bulk deposit limit for scheduled Urban Cooperative Banks with deposits over Rs 1,000 crore. For these banks, bulk deposit now refers to single term deposits of Rs one crore and above, as opposed to the previous limit of Rs 15 lakh. Other Urban Cooperative Banks maintain the Rs 15 lakh threshold for bulk deposits.