In India, an account is deemed unclaimed if there is no activity for at least a decade. Notably, there is an estimated Rs.64000 crore worth unclaimed accounts in banks, insurance companies, post offices, apart from inoperative provident fund accounts. Getting people to claim old accounts is one of the biggest problems encountered by these institutions. The process is not only unprofitable to the institutions, but also tedious and often comes at a cost for those who are the rightful claimants of the money. Here is what everybody ought to know about unclaimed funds.
Funds end up falling in the unclaimed category usually when account holders operate their accounts secretly and the family is not in the know of things. Another usual occurrence includes failure to update KYC information for various reasons including relocation.
The above notwithstanding, one can avoid getting into such situations. Given below are few tips:
• Share key information about your financial ventures and assets with a trusted family member so that in the event of your demise, someone else can do the needful.
• Have accounts accessible through online portals and receive regular updates via email
• Update contact information as and when needed
• Advise asset managers and banks to perform direct credits to your preferred bank account.
All these steps are no rocket science, but you know what, they have their weight in gold.
Change in procedure
In late 2005, the Reserve Bank of India (RBI), which regulates and is in charge of the process, made amendments to the process of making and handling claims. This resulted in streamlining of things, making it easier and cheaper. RBI directed banks to release money within 15 days of being approached by a claimant with proof of the depositor’s death and the right to receive the money. The RBI waived the need for claimants to produce further documentation, including letter of probate, indemnity, and succession certificates.
Tracing unclaimed funds is not an easy task since there are no centralized databases, which leaves precious little in terms of options for the insurance companies. One of these is contract services of a specialized company that engages in managing various databases and websites to try and locate the money. These services come at a cost. Notwithstanding the element of uncertainty when undertaking this exercise, the amount should be worth the expense.
If funds remain unclaimed for more than seven years they are transferred to an Investor Education and Protection fund (IEPF) established under the Securities Exchange Board of India (SEBI). Similarly, the RBI established the Depositor Education and Awareness Fund (DEAF), where unclaimed deposits and balances of inoperative bank accounts are transferred after waiting for a decade or so. Where traceable, these funds can be fully restored to the rightful account holder (on confirmation of identity) or a rightful claimant.