What changed
RBI clarified procedures for paying interest on accounts frozen by enforcement authorities. For term deposits, banks must obtain renewal requests, renew at original term, and handle overdue periods with interest in a separate sub-account. For savings accounts, interest must be credited regularly.
What it means for you
Banks must follow a structured process to ensure frozen term deposits earn interest without disruption, preventing customer grievances. This standardizes handling of frozen accounts, reducing legal risks and ensuring compliance with enforcement orders. Lenders need to update their internal policies for overdue interest and sub-account management.
What you must do
- Obtain written renewal request from customer for frozen term deposits at maturity.
- Renew deposit at original term without issuing new receipt; note renewal in ledger.
- Advise government department and depositor via registered post about renewal and interest rate.
- If overdue period exceeds 14 days, pay interest per bank policy and keep in separate interest-free sub-account until release.
- Continue crediting interest to frozen savings bank accounts regularly.
Who it affects
All scheduled commercial banks (excluding RRBs), Customers with accounts frozen by enforcement authorities, Bank operations and compliance teams
What happens if the overdue period for a frozen term deposit is less than 14 days?
If the overdue period does not exceed 14 days from the date of the renewal request, the deposit can be renewed from the original maturity date without any special treatment.
How should interest be handled for frozen savings bank accounts?
Banks must continue to credit interest to the frozen savings bank account on a regular basis as per normal practice.