The Reserve Bank of India (RBI) on Friday in a review of rules on unclaimed deposit with banks said, customers can still earn interest rates after Term Deposit (TD) matures and proceeds are unpaid.
Until now, unclaimed deposits attracted the rate of interest applicable to savings deposits in case a term deposit matured and the proceeds were left unpaid.
‘It has been decided that if a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract a rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower,’ says RBI in a circular.
The new rules are applicable for deposits on all commercial banks, small finance banks, local area banks and cooperative banks.
Term Deposits refer to interest-bearing deposits kept with the bank for a fixed maturity period and the depositor is not allowed to withdraw this sum till the end of the maturity period. It includes recurring, cumulative, annuity, reinvestment deposits and cash certificates.
The development comes at a time when unclaimed deposits with banks have been growing every year. The total value of unclaimed deposits surged to Rs 18,380 crore by the end of FY19 from Rs 14,307 crore a year earlier.
Deposits are classified as unclaimed by RBI if the customer doesn’t make any transaction in the account for 10 years or more.
These unclaimed funds are transferred to RBI’s Depositor Education and Awareness (DEA) Fund every month. The DEA funds were worth Rs 33,144 crore in the financial year 2019-20 and last year it was Rs 25,747 crore, according to RBI’s annual report.
These funds transferred by various banks to the DEA are invested in instruments in government securities by an RBI committee. The income generated is used for paying back interest on deposits and investor education purposes.
(The article is posted from ET Now News without any modification.)