Until now, unclaimed deposits attracted the rate of interest applicable to savings deposits in case a term deposit matured and the proceeds were left unpaid. But hereafter as per a Reserve Bank of India (RBI) circular dated July 2, 2021 if a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract a rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.
The development comes at a time when unclaimed deposits with banks have been growing every year. The total value of unclaimed deposits surged to Rs 18,380 crore by the end of FY19 from Rs 14,307 crore a year earlier. Unclaimed funds harking back to ten years are transferred to RBI’s Depositor Education and Awareness (DEA) Fund every month. The DEA funds were worth Rs 33,144 crore in the financial year 2019-20 and last year it was Rs 25,747 crore, according to RBI’s annual report.
These funds transferred by various banks to the DEA are invested in instruments in government securities by an RBI committee. The income generated is used for paying back interest on deposits and investor education purposes.
It is a trifle strange that the RBI has followed the policy of Employees' Provident Fund Organisation (EPFO) in this regard---stew in your own juices. The EPFO reportedly has unclaimed provident fund stockpile of Rs 80,000 crore. Most of this belongs to the benighted and itinerant workers who simply have no clue about what provident fund is. No serious attempts are made to reach out to these workers through post or advertisement or Short Message Service (SMS).
The RBI, too, seems to be following the footsteps of EPFO. Why can’t banks reach out to the apathetic or unfortunate depositors given the fact that it is much easier to contact them? The Ministry of Corporate Affairs too has access to unclaimed dividend which rightly should be traced back to the benighted investors rather than be appropriated by the government.
Bank passbooks and statements must be tailored to show the amount of matured deposits that have either not been renewed or redeemed. With banking software, depositor-friendly measures can be easily taken. ATM withdrawals should also be the occasion for such soft reminders with message flashing on the screen when a fixed deposit is linked to a savings account.
My friend made a rueful remark in exasperation rather than in anger the other day---parents may not leave assets, but they should not leave liabilities. He was referring to his late father leaving behind at least twenty deposit receipts most of them unclaimed. He had to run from pillar to post, one bank to another and what is more call his siblings over whenever the deposits were in their names.
Elders know but just one form of saving apart from investment in gold, i.e. bank fixed deposit. Banks should be kinder to them and be sensitive to their emotions. Nominees must be insisted upon at the time of opening of fixed deposits with their postal and email addresses as well as telephone numbers. There is no reason why they cannot be reached to in the face of unclaimed deposits. It is not enough to pay extra half percent interest to senior citizens. In this day and age, the entire banking operation is software driven. There is no reason why fixed deposits should not be made depositor and nominee-friendly.
What the RBI instead has done is to act as a martinet--- if you don’t claim mature deposits, your money would languish is the stern message it has just read out. As a banking watchdog, it ought to have spared a thought for depositors whose money, come to think of it, is lent by banks to the borrowers to a large extent.
)The writer is a senior columnist and tweets @smurlidharan)