RBI Guidelines 2024: Managing Inoperative Accounts and Unclaimed Deposits in Banks

The Reserve Bank of India (RBI) issued a circular dated December 2, 2024, addressing the management of inoperative accounts and unclaimed deposits. This directive aims to streamline the handling of dormant accounts, enhance customer convenience, and ensure compliance with operational guidelines. The circular emphasizes banks’ responsibility in reducing inoperative accounts and easing the activation process for frozen accounts.

Key Highlights of the Circular: Managing Inoperative Accounts & Deposit

1. Annual Review of Inoperative Accounts:
2. Challenges Identified:
3. Enhanced KYC Compliance:
4. Empathy Towards Underprivileged Sections:
5. Special Campaigns and Aadhaar Integration:
6. Monitoring and Reporting Requirements:
7. Action Plans for Compliance:

Key Highlights of the Circular:

1. Annual Review of Inoperative Accounts: Banks are required to perform an annual review of accounts with no customer-induced transactions for over a year. These accounts, particularly those under government schemes like Direct Benefit Transfers (DBT) or scholarships, must remain accessible for credit transactions.
2. Challenges Identified: A significant number of inoperative accounts are observed across banks. Factors include outdated Know Your Customer (KYC) details and prolonged inactivity. Customers face difficulties, such as mismatches in account details, during the activation process.
3. Enhanced KYC Compliance: Banks should expedite KYC updates to prevent accounts from being frozen. Innovative solutions, including mobile/internet banking and video-based customer identification, should be implemented for smoother KYC processes.
4. Empathy Towards Underprivileged Sections: Accounts linked to government welfare schemes often belong to underprivileged individuals. Banks must adopt an empathetic approach to ensure these accounts remain active and accessible.
5. Special Campaigns and Aadhaar Integration: Banks are encouraged to organize awareness campaigns to assist in account activation. Facilitation of Aadhaar updates through designated branches is highlighted as a critical step.
6. Monitoring and Reporting Requirements: Progress in reducing inoperative accounts must be reviewed by the Customer Service Committee (CSC) of the Board. Quarterly updates on these efforts are to be submitted to the Senior Supervisory Manager (SSM) via the DAKSH portal.
7. Action Plans for Compliance: Banks must prepare and implement actionable plans to fully comply with the guidelines. The circular mandates presenting these plans to the CSC of the Board.

Actionable Recommendations for Banks:

• Streamline Customer Onboarding: Simplify and digitize KYC updates using technology-driven solutions.
• Enhance Customer Support: Train staff to handle dormant account activations empathetically, particularly for welfare scheme beneficiaries.
• Public Awareness Initiatives: Regularly conduct financial literacy campaigns to educate customers on account maintenance and activation procedures.
• Monitor Compliance Effectively: Establish internal controls to track and report the progress of activation and KYC updates.

 Summary:

This RBI circular (managing inoperative accounts & deposit) highlights the critical need for banks to improve the management of inoperative accounts. By focusing on seamless KYC updates, fostering customer awareness, and prioritizing underprivileged account holders, banks can ensure compliance while enhancing customer satisfaction. The outlined steps aim to reduce dormant accounts and enable smoother financial transactions for all customers.