Expressing concern over increasing unclaimed deposits with banks, companies, mutual funds and insurers, finance minister (FM) Nirmala Sitharaman advised sector regulators to conduct a special drive to settle unclaimed deposits and claims. The value of unclaimed deposits in India is estimated to be over Rs90,000 crore, out of which the total unclaimed deposits transferred to the Reserve Bank of India (RBI) by public sector banks (PSBs) was Rs35,012 crore as of February 2023. As reported by Moneylife, the total amount of unclaimed deposits was over Rs82,000 crore as of July 2021.
Speaking at the 27th meeting of the financial stability and development council (FSDC), Ms Sitharaman says, “Regulators should conduct a special drive to facilitate the settlement of unclaimed deposits and claims in the financial sector across all segments, such as banking deposits, shares and dividends, mutual funds, and insurance.”
Unclaimed funds of the public get transferred to government-owned funds like RBI’s Depositor’s Education and Awareness Fund (DEAF), Investor’s Education and Protection Fund (IEPF) and Senior Citizen’s Welfare Fund (SCWF) on the grounds that the legal heirs or nominees did not claim them.
A July 2021 report from Economic Times (ET) has estimated total unclaimed deposits at over Rs82,000 crore. It includes Rs26,497 crore in the provident fund (PF) accounts, Rs18,381 crore in inactive or dormant bank accounts, excluding Rs4,820 crore in matured fixed deposits (FDs), Rs17,880 crore in mutual funds, Rs15,167 crore in life insurance policies, and Rs4,100 crore in dividends. As per these figures, as of July 2021, total unclaimed deposits were over Rs82,000 crore. Considering a bank interest rate of 6%, these funds would have increased to around Rs92,000 crore in two years.
Moneylife has repeatedly written about the difficulty in having bank accounts unfrozen and made operative again. The constant accretion to DEAF, despite stringent KYC requirements, is testimony to the callousness of a system that makes it difficult for funds to be transferred to rightful claimants. In the case of death, each bank makes up its own rules to transfer funds (‘Zindagi ke baad bhi’: COVID and the Worries about Transmission and Succession); some even arm-twist heirs to park it in fixed deposits with the same banks. Apart from the red-tape involved in obtaining succession certificates, some banks, in addition to succession certificates, demand two sureties from unrelated persons—which is a completely unreasonable demand.
The Insurance Regulatory and Development Authority of India (IRDAI) mandates that all insurers transfer all policyholders’ money lying unclaimed for over 10 years to SCWF of the government set up in 2015. Unclaimed deposits under small savings, public provident fund (PPF), employee provident fund (EPF), all post-office savings accounts, senior citizens’ savings scheme accounts, Indira Vikas Patra and Kisan Vikas Patras are also transferred to the SCWF.
Sucheta Dalal, managing editor of Moneylife and founder-trustee of Moneylife Foundation, had filed a public interest litigation (PIL) in the Supreme Court on making public on a centralised platform details of unclaimed money of investors and depositors taken by various regulators and which remains inaccessible to rightful legal heirs.
In response to the petition, the RBI submitted that, during FY21-22, the depositors’ DEAF refunded Rs505.51 crore of 187,975 claimants. According to RBI, settling disputed claims by banks may involve adjudication of facts and appreciation of evidence which are normally subject matters of the court and could lead to avoidable litigation involving the banks, which is not in the interest of the banks and their depositors.
Last month, RBI governor Shaktikanta Das announced the development of a common web portal to search for unclaimed deposits.
At present, the depositors or beneficiaries of unclaimed bank deposits of 10 years or more have to go through the websites of multiple banks to locate such deposits, Mr Das said.
“Now, in order to improve and widen the access of depositors and beneficiaries to information on such unclaimed deposits, it has been decided to develop a web portal to enable search across multiple banks for possible unclaimed deposits. This will help depositors and beneficiaries in getting back unclaimed deposits,” he added. (Read: RBI To Develop a Centralised Portal To Search Unclaimed Deposits)
IEPF, which holds monies from the unclaimed dividend account that remains unpaid or unclaimed for seven years, offers a search facility on its website, operated under the ministry of corporate affairs (MCA-21). Further, IEPF has relaxed certain requirements, including advanced receipt, succession certificate or probate of a will (relaxed for a claim of Rs5 lakh for physical and demat shares). It also allowed self-attestation by the claimant instead of notarised documents while relaxing the requirement of affidavits and surety.
As of 31 January 2023, IEPF processed 74,396 claims and transferred dividends worth Rs35.18 crore to claimants. It also transferred 2.29mn (million) shares to the claimants.
Last month, terming the issue of unclaimed deposits as ‘very large’, the apex court allowed senior counsel Prashant Bhushan to file a combined rejoinder in the PIL. During the hearing, Justice PS Narasimha mentioned that “This issue is very large. It is being considered in detail.”
The PIL urges developing a centralised online database under the control of RBI that will provide information about the deceased account holder, including such details as the name, address and last date of transaction by the deceased account holder. Further, it should be mandatory for banks to inform RBI about the inoperative or dormant bank accounts, and this exercise should be repeated after an interval of nine to 12 months.