Unclaimed funds with banks, insurance companies near Rs 50,000 crore

unclaimed funds, banks, Senior Citizens’ Welfare Fund, state bank of india, insurance policies

(This story originally appeared in on Jul 28, 2021)

Funds lying unclaimed with banks and insurance companies are nearing the Rs 50,000-crore mark, with an estimated addition of Rs 5,977 crore into bank accounts during 2020.

While the exact number of insurance policies where money has not been claimed is not immediately available, the government on Tuesday told Parliament that Rs 24,356 crore was lying in over 8.1 crore accounts. This translates into an average balance of around Rs 3,000 in each of the accounts.

The nationalised banks are close to the average, with Rs 3,030 being the average balance, which was Rs 2,710 in case of

State Bank of India

and Rs 3,340 for private lenders. In contrast, foreign banks on an average had Rs 9,250 lying unclaimed in over 6.6 lakh accounts. At Rs 654, the average balance was lowest in case of small finance banks, while it was just under Rs 1,600 for regional rural banks.

unclaimed funds, banks, Senior Citizens’ Welfare Fund, state bank of india, insurance policies

Unclaimed funds have been a perennial problem as several policyholders or their family members do not claim the maturity amount from insurance companies for multiple reasons. For instance, in several cases, the family members of the policyholder are unaware of the insurance cover purchased. Similarly, in many cases, either the documents are misplaced or the buyer misses the maturity date.

In case of banks, change of residence is seen to be a major source of funds lying idle as an account holder may not go back to another city to transact. Also, people with multiple accounts often leave some money in one of their accounts and do not claim it.

Further, in case of accounts or deposits without nomination, the heirs often do not complete the cumbersome paperwork, resulting in funds lying with banks.

Of course, the amount dwarfs in comparison to the overall deposit base of banks but is large enough for even the regulator to instruct banks to track the beneficiaries.

“The RBI has advised banks to play a more proactive role in finding the whereabouts of the account holders of unclaimed deposits/inoperative accounts,” junior minister for finance Bhagwat Karad said in response to a question in the Rajya Sabha.

In case of banks, the RBI has mandated that unclaimed amounts should be transferred to the Depositor Education and Awareness Fund and subsequently used for the promotion of depositors’ interest and other specified purposes. The regulator has also made it mandatory for banks to provide on their websites a search facility for depositors to check if they have any inoperative accounts with the bank.

Insurance companies are required to annually transfer funds of policyholders lying unclaimed for more than 10 years to the Senior Citizens’ Welfare Fund, which is to be utilised for schemes for promoting the welfare of senior citizens, the minister said.

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