Reserve Bank of India i.e. RBI has expressed concern over the increasing freeze and inoperative accounts in banks. Banks have been instructed to immediately take all possible necessary steps to reduce such accounts. Banks have been asked to adopt simple processes like mobile or internet banking, non-home branch, video customer identification for KYC of such accounts.
Along with this, it has also been asked to ensure that the amount coming in such accounts through various schemes of the Central or State Governments continues to be deposited without any problem. Accounts in which there are no transactions for more than two years are categorized as inactive accounts.
Unclaimed deposits increased by 28% on annual basis
RBI has advised banks to issue report on inoperative accounts on quarterly basis. Earlier, RBI had instructed banks to increase surveillance to prevent fraud from such accounts. According to government data, by the end of 2023, more than Rs 1 lakh crore was stuck in such accounts. Of these, about Rs 42 thousand crores are unclaimed.
In December 2023, the Finance Ministry had informed the Parliament that unclaimed deposits in banks had increased by 28% on an annual basis to Rs 42,270 crore in March 2023, which was Rs 32,934 crore in March 2022. Of these, Rs 6,087 crore is in private banks.
Inoperative account: everything you need to know
Why has RBI given instructions to monitor inoperative accounts?
RBI had instructed banks to monitor reactivated accounts for six months to reduce the risk of fraud from such accounts. Also, instructions were given to monitor accounts which have been inactive for one year.
How are inoperative accounts increasing the risk of fraud?
According to Ketan Mukhija, senior partner at Bergian Law, these accounts are often targeted for scams and identity theft. Bank employees can misuse these accounts for unauthorized transactions.
How can inactive accounts promote illegal activities?
According to Vikram Babbar, partner of EY Forensic and Integrity Services, illegal money can be sent to these accounts. An instant withdrawal may occur to erase the transaction. These become ideal mediums for illegal operations.
Fraud of Rs 11 thousand crore in 9 months
According to the Home Ministry, India suffered a loss of Rs 11,333 crore due to cyber fraud during the first nine months of 2024. About 20% of Jan Dhan accounts were inactive by December 2023. This means that out of the total 51 crore Jan Dhan accounts, about 10.3 crore accounts were inactive.
Note: Interest can be stopped in inactive accounts, RBI can invest money in welfare.
- Reactivating the account not only helps in financial inclusion but also keeps the amount deposited in it safe. Account holders can transact without any hassle.
- Inactive accounts may be subject to maintenance or inactivity fees. Account holders lose access to services like online banking or requesting a new debit card. Interest may also stop.
- Unclaimed deposits are sent to the Educational and Awareness Fund managed by the RBI.
Activate account like this: This process is free, account can be activated with a transaction of ₹ 100.
- According to RBI guidelines, banks cannot charge any charge for opening inoperative accounts. That means the process of activating the account is absolutely free.
- Such account holders should go to the branch and fill the KYC form with their signature to activate the account.
- Provide self-attested identity card and home address along with the form.
- Enter some amount to activate the account. The account can be activated with a minimum transaction of Rs 100.
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