Inoperative accounts: How will RBI's revised guidelines benefit customers?

• The RBI has introduced revised guidelines regarding the classification of accounts and deposits as inoperative and unclaimed.
• As per the norms, account holders can reactivate their accounts by submitting KYC documents.

Inoperative Account and Unclaimed Deposits

• A savings or current account is deemed inoperative if there are no 'customer induced transactions' for over two years.
• Customer induced transactions include financial and non-financial activities initiated by the account holder.
• Unclaimed Deposits
  • Balances in savings/current accounts not operated for 10 years
  • Term deposits unclaimed within 10 years

Revised RBI Guidelines

• Banks are required to conduct an annual review for accounts lacking customer-induced transactions for over a year.
• In cases without explicit term deposit renewal mandates, banks must review accounts where customers haven't withdrawn or transferred proceeds post-maturity.

Communication and Reactivation

• Banks are instructed to notify account holders via letters, email or SMS about inactivity for the last year.
• If no operations occur in the next year, the account becomes 'inoperative,' requiring KYC document submission for reactivation.

Account Classification Criteria

• Only customer-induced transactions are considered for classifying an account as inoperative.
  • It excludes bank-induced transactions like charges and fees.
• Account classification is specific to the account, not the customer.
• Zero-balance accounts for government beneficiaries and student scholarships are exempt.

Reactivation Process

• Banks should offer KYC updation at all branches and through video-customer identification process (V-CIP) upon request.
• Reactivation must adhere to KYC guidelines, and no charges should be imposed for activation.

Non-maintenance Penalty and Interest

• No penal charges are allowed for non-maintenance of minimum balances in inoperative accounts.
• Interest on savings accounts must be credited regularly, irrespective of the account's operational status.

Prelims Takeaway

• Inoperative Accounts
• Reserve Bank of India