What changed
RBI replaced fragmented instructions with a single, consolidated circular covering definitions, classification, periodic review, fraud prevention, and customer tracing for inoperative accounts and unclaimed deposits. The key change is the clear distinction between 'bank induced' and 'customer induced' transactions, with only the latter determining account activity. Banks are now required to proactively trace customers, nominees, or legal heirs for reactivation or claim settlement.
What it means for you
Banks must overhaul their internal processes to identify and monitor accounts with no customer-induced transactions for two years, moving beyond simple balance-based triggers. The new rules aim to reduce the growing pool of unclaimed deposits by forcing banks to actively locate depositors or their heirs. Lenders will need to invest in better data analytics, customer outreach, and fraud detection systems to comply and avoid regulatory scrutiny.
What you must do
- Update your account classification systems to flag accounts with no customer-induced transactions for 24 months as inoperative.
- Establish a dedicated team for tracing customers, nominees, or legal heirs of inoperative and unclaimed accounts using multiple channels.
- Implement a robust grievance redressal mechanism for expeditious resolution of claims related to inoperative accounts.
- Conduct periodic reviews of inoperative accounts to detect and prevent fraud, especially dormant accounts.
- Ensure all staff are trained on the new definitions and procedures before the April 1, 2024 effective date.
Who it affects
All Commercial Banks including RRBs, All Co-operative Banks, Deposit operations and customer service teams, Compliance and risk management departments, Legal and recovery teams handling unclaimed deposits
What is the new definition of an 'inoperative account'?
A savings or current account is now classified as inoperative if there are no 'customer induced transactions' for over two years. Bank-induced transactions like charges or interest do not count.
When do these revised instructions take effect?
The circular is effective from April 1, 2024. Banks must have their systems and processes ready by that date.
What must banks do to trace customers of unclaimed deposits?
Banks must implement proactive measures to locate account holders, nominees, or legal heirs using available contact details, and facilitate reactivation or claim settlement.