Indian inoperative bank accounts not eligible for Penal Charges


One of the conditions a customer signs while opening a bank account is acceptance of penal charges in case minimum balance is not maintained as per the Terms and Conditions of the respective Saving/Current Bank product.

This clause of levying penal charges was applicable to inoperative accounts too.

Q: What are inoperative accounts in the Indian banking context?

Ans: A savings as well as current account should be treated as inoperative / dormant if there are no transactions in the account for over a period of two years.

a)    For the purpose of classifying an account as ‘inoperative’ both the type of transactions i.e., debit as well as credit transactions induced at the instance of customers as well as third party should be considered. However, the service charges levied by the bank or interest credited by the bank should not be considered.

b)   There may be instances where the customer has given a mandate for crediting the interest on Fixed Deposit account to the Savings Bank account and there are no other operations in the Savings Bank account. Since the interest on Fixed Deposit account is credited to the Savings Bank accounts as per the mandate of the customer, the same should be treated as a customer induced transaction. As such, the account should be treated as operative account as long as the interest on Fixed Deposit account is credited to the Savings Bank account. The Savings Bank account can be treated as inoperative account only after two years from the date of the last credit entry of the interest on Fixed Deposit account.

c)    Operation in such accounts may be allowed after due diligence as per risk category of the customer. Due diligence would mean ensuring genuineness of the transaction, verification of the signature and identity etc. However, it has to be ensured that the customer is not inconvenienced as a result of extra care taken by the bank.

d)   Banks should charge any fees for activation of inoperative account.

e)    Interest on savings bank accounts should be credited on regular basis whether the account is operative or not. If a Fixed Deposit Receipt matures and proceeds are unpaid, the amount left unclaimed with the bank will attract savings bank rate of interest.

 

Reserve Bank of India, vide Notification No: RBI/2013-14/580 DBOD. Dir.BC.No. 109 /13.03.00/2013-14 Dt.May 6, 2014, clarified on levying penal charges on non-maintenance of minimum balances in inoperative Accounts

The reference point is Part B of the First Bi-monthly Monetary Policy Statement 2014-15 announced on April 1, 2014, proposing certain measures towards consumer protection such as non-levy of penal charges for non-maintenance of minimum balance in any inoperative accounts.

The other RBI circulars referred here are :

01)Circular DBOD. Dir. BC. 53/ 13.10.00/ 2002-03 dated December 26, 2002 on ‘Minimum Balance in Savings Bank Accounts’ advising banks to inform customers regarding the requirement of minimum balance in savings bank account and levy of penal charges for non-maintenance of the same at the time of opening the account in a transparent manner.

02)Terms of para 3 of our Circular DBOD. No. Leg. BC.35/09.07.005/2012-13 dated August 10, 2012 on ‘Financial Inclusion- Access to Banking Services – Basic Savings Bank Deposit Accounts’ it was advised to banks that no charge should be levied for non-operation/activation of Basic Savings Bank Deposit Accounts (BSBDAs).

 

Hence, Reserve Bank of India has advised banks henceforth not to levy penal charges for non-maintenance of minimum balances in any inoperative account.

“Instead of levying penal charges for non-maintenance of minimum balance in ordinary savings bank accounts, banks should limit services available on such accounts to those available to basic savings bank deposit accounts and restore the services when the balances improve to the minimum required level,”

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