RBI says unclaimed deposits will attract interest, here’s what it says

The Reserve Bank of India on July 2 said that customers can still earn interest after Term Deposit (TD) matures and proceeds are unpaid.

In a review of unclaimed deposits with banks, the central bank said: “It has been decided that if a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower,” the RBI statement said.

Earlier, the rule on overdue domestic deposits stated that if a Term Deposit matures and proceeds are unpaid, the amount left unclaimed with the bank will attract rate of interest as applicable to savings deposits.

Also read: Wary of losses, banks lending less to big industries: RBI report

The review of instructions came as unclaimed deposits with banks have been growing every year. By the end of FY19, the total value of unclaimed deposits rose to around ₹18,380 crore. A year ao, the amount was ₹14,307 crore.

RBI classifies a deposit as unclaimed when a customer doesn’t make any transaction in the account for 10 years or more. Unclaimed deposits include such funds in current and savings accounts, fixed deposits, and other deposits (like recurring deposit and pay orders) with banks.

All such money is transferred to RBI’s Depositor Education and Awareness (DEA) Fund every month. In the financial year 2019-20, DEA fund was about ₹33,114 crore. Last year, it was ₹25,747 crore, according to the central bank’s annual report.

Also read: Provident fund interest rate for 2020-21 remains unchanged at 8.5%

The money transferred to the fund by various banks is invested in instruments such as government securities by a committee set up by the RBI. The income thus earned is used for paying interest on the deposits as well as using it for investor awareness and education purposes.

The Depositor Education and Awareness Fund Scheme (DEAF Scheme) was formulated by the RBI in 2014 for the promotion of depositors’ interest and for any other related purposes deemed necessary by the RBI.

This fund was established following the Monetary Policy statement 2013-14, announced by the RBI Governor on May 3, 2013.