India has ₹90,000 cr lying idle in PF, LIC, bank accounts; what happens to it?

Money unclaimed is money not benefitting anyone, and India has about ₹90,820 crore of it.

That’s the amount lying unclaimed, as of December 2020, in various bank accounts, Provident Fund (PF) accounts, inactive mutual funds (MFs), LIC policies, matured fixed deposits and unclaimed dividends.

Of this, ₹24,497 crore is lying in unclaimed PF accounts and ₹24,356 crore in unclaimed bank accounts (up ₹5,977 crore from 2019), per data released by the Reserve Bank of India (RBI). The monies lying in inactive MFs and LIC policies are ₹17,880 crore and ₹15,167 crore, respectively.

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The RBI has advised banks to play a more proactive role in finding the whereabouts of the account holders of unclaimed deposits/inoperative accounts.

Following an amendment to the Banking Regulation Act, 1949, and insertion of Section 26A, the RBI framed the Depositor Education and Awareness Fund Scheme (DEAF), 2014. This was further notified via Gazette Notification dated May 24, 2014. Under the scheme, the funds lying unclaimed are utilised to promote depositors’ interests through the DEAF.

Staggering number of accounts

The numbers, in terms of accounts, are just as staggering. Per RBI data, 8.13 crore accounts are lying unclaimed in banks across the spectrum — public sector, private, foreign, regional rural and other banks. Unclaimed deposits include money in current and savings accounts, fixed deposits, and other deposits (like recurring deposit, pay orders, etc) with banks.

An account is considered dormant or inoperative if there has been no transaction (apart from interest credited or maintenance fees charged) for at least two years. The bank is required to contact the customer via e-mail or phone about this.

According to RBI regulations, if a bank account remains inoperative for at least 10 years, the money can be transferred to the DEAF fund. All such money is transferred to the fund every month.

Nomination is crucial

According to bank and PF officials, the reason for many accounts lying unclaimed is account holders dying without naming a nominee. “In many cases, the family members were not aware that such an account was there. Many were surprised to know that a few thousands or lakhs are in the account of a family head after he passed away,” said a bank official.

Under RBI norms, banks need to upload details of unclaimed accounts on their respective websites. After checking the details, an account holder or his/her family member can visit the bank branch with a duly filled claim form, receipts of the deposits and know your customer (KYC) documents to claim the money.