What changed
Previously, savings accounts opened for government scheme benefits (scholarships, DBT) were treated as inoperative if no transactions occurred for two years, causing difficulties in crediting funds. Now, UCBs must assign a distinct product code to these accounts in their CBS, exempting them from the dormant/inoperative classification based on non-operation.
What it means for you
For UCBs, this reduces operational friction and customer complaints when government credits fail due to dormant status. It also lowers the risk of funds being returned or delayed, improving scheme efficiency. However, banks must still exercise due diligence on transactions to prevent fraud, while ensuring customer convenience.
What you must do
- Assign a separate product code in your CBS for all accounts opened for government scholarship or DBT credits.
- Ensure these accounts are not automatically marked as inoperative/dormant due to lack of customer-initiated transactions for two years.
- Implement due diligence checks (e.g., signature verification, identity confirmation) for any operations in these accounts to mitigate fraud risk.
- Avoid inconveniencing customers while applying these safeguards.
Who it affects
All Primary (Urban) Co-operative Banks (UCBs), Beneficiaries of government scholarship and DBT schemes, State and Central Government agencies disbursing these benefits
Why did RBI issue this circular for UCBs?
State and Central governments reported difficulties crediting scholarships and DBT into accounts that were classified as dormant due to no transactions for two years. This circular resolves that by exempting such accounts from the dormant tag.
What must UCBs do to implement this?
UCBs must create a distinct product code in their Core Banking Solution for these accounts, so the system does not treat them as inoperative. They must also continue due diligence on transactions to prevent fraud.
Does this change affect other types of accounts?
No, this exemption applies only to savings bank accounts specifically opened for credit of scholarship amounts or Direct Benefit Transfer under government schemes. Other accounts remain subject to existing inoperative account norms.