A sharp rise in unclaimed money left with banks and insurance companies may be the result of low depositor awareness, especially after the phenomenal increase in bank accounts amid the Digital India initiative. Finance Minister Nirmala Sitharaman told the Lok Sabha that unclaimed funds left with the banks rose 26.8 per cent last year to Rs 14,578 crore in 2018. The unclaimed money left in the banks was Rs 11,494 crore in 2017.
The unclaimed funds in the State Bank of India (SBI) alone amounted to Rs 2,156.33 crore at the end of 2018, she said. The minister said the life insurance sector reported unclaimed funds of Rs 16,887.66 crore in the insurance companies while non-life insurance companies had Rs 989.62 crore at the end of September 2018, a PTI report said. "As far as unclaimed deposits in banks are concerned, in pursuance of the amendment to the Banking Regulation Act, 1949, and insertion of Section 26A in the said Act, RBI has framed the Depositor Education and Awareness Fund (DEAF) Scheme, 2014," said Sitharaman, the first-time finance minister who has been busy preparing for the July 5 Union Budget 2019 presentation.
The banks calculate the cumulative balances in all accounts which are not operated for 10 years or more (or any amount remaining unclaimed for 10 years or more) along with the interest accrued and transfer them to the DEAF, she said. In case of demand from a customer whose unclaimed deposit had been transferred to the DEAF, the banks are required to repay the customer, along with interest payable, and seek a refund from the DEAF.
The rate of interest payable on interest-bearing deposits transferred to the DEAF has been changed to 3.5 per cent per annum from July 1, 2018, from the earlier 4 per cent. The DEAF is used for promotion of depositors' awareness as the Reserve Bank of India (RBI) deems fit, she added.
The funds remaining unclaimed for more than 10 years with insurance companies are transferred to the Senior Citizens' Welfare Fund (SCWF) by March 1 every year. "The SCWF is utilised for schemes for promoting the welfare of senior citizens. If a claim is made, insurers are required to pay the identified unclaimed amount along with the investment income so credited to the policyholders or beneficiaries, as per the procedure," Sitharaman told the lower house of Parliament.
Sitharaman said the incidents of fraud in public sector banks had declined to 739 in 2018-19 as compared to 1,545 in the previous financial year. The public sector banks recovered an aggregate amount of Rs 2.06 lakh crore from the non-performing asset (NPA) accounts during the last five financial years through legal action initiated by them, she said.