A SECTION of the media recently reported that in February 2023, an astounding Rs 35,000 crore worth of unclaimed deposits from PSU banks were transferred to the Reserve Bank of India.This amount, tied to 10.24 crore accounts that had been dormant forover tenyears, highlights a significant issue in banking: the unclaimed wealth of deceased customers. Dormantbank accounts,inactive for over two years, are more common than expected.Reasons include the death of a customer who didn’t informheirs,forgottenoldaccounts, or failure toupdateaddresschanges. Other cases involve accounts opened for minors that are neglected as they grow, or elderly customers with cognitive issues like Alzheimer’s. After a decade, these funds are transferred to the RBI. Retrieving them can be daunting for heirs or nominees, especially if unaware of the account’s existence in the first place. Threat of fraud: Dormant accountsarenotonlyatriskofbeing forgotten; they are also prime targets for fraud. Such incidents highlight a significant risk: the lack of regular monitoring of dormant accountsmakes them vulnerable todishonestinsiders. These “banksters,” as they are sometimes called, exploit dormant accounts because the rightful owners are unlikely to notice the discrepancies in a timely manner.

 

By the time the fraud is detected, the damage is often already done, with little recourse for the victims. Role of banks:Banks should maintain a robust system to notify customers when accounts are nearing dormancy. Automated emails or SMS alerts often lack the personal touch needed for prompt action. Banks must also ensure legal heirs are aware of existing accounts by updating nominee information and reminding customers to share account details with family. Workshops or informational sessions can educate customers, especially seniors, on keeping financial records updated. Surprise audits can catch potential fraudsters off guard, and stronger internal controls are essential to preventunauthorisedaccess todormant accounts. Customers must also take proactive steps: Disclose all bank accounts, including FDs, to family members or trusted individuals.

 

Maintaina record of these accounts and the bank’s contact information for emergencies. Nomination and Will: Ensure all accounts have nominations and include them in a Will for added security. Regular account monitoring: Periodicallyreviewbankstatements todetectunauthorised transactions ortoprevent accounts frombecoming dormant. Account consolidation: Consolidate multiple accounts to simplify tracking and make it easier for heirs to claim funds. Update contact details: Keep the bank informed of any changes in address or contact details to ensure prompt receipt of important communications. Globally,bankshave adopted various measures to address dormant accounts and unclaimed deposits. In the U.S., the Federal Deposit InsuranceCorporation (FDIC) mandates banks tolocate account holdersbeforemarking accounts asdormant. Some countries have central registries for dormant accounts,aiding heirsin findingun claimed assets. In Australia,banks transferdormant accounts to Australian Securities and Investments Commission(ASIC) after seven years, which then publishes a searchable database. Indian banks could consider similar measures.