RBI tweaks its rule
Customers can still earn interest rates after a Term Deposit (TD) matures and proceeds are unpaid, the Reserve Bank of India on Friday in a revision of rules on unclaimed deposit with banks. Until if a term deposit expired and the proceeds were not paid, unclaimed deposits were subject to the same rate of interest as savings deposits.
If a Term Deposit (TD) matures with unpaid proceeds, the amount left unclaimed with the bank will earn the rate of interest applicable to savings accounts or the contracted rate of interest on the matured TD, whichever is lower,’ says RBI in a circular.
Restrictions apply to all commercial banks, small financing banks, community banks, and cooperative banks. Term Deposits are interest-bearing deposits held with a bank for a certain length of time, with the depositor unable to withdraw the funds until the maturity period expires. The development comes at a time when unclaimed bank deposits are increasing year after year. By the end of FY19, the total value of unclaimed deposits had risen to Rs 18,380 crore, up from Rs 14,307 crore the previous year.
RBI classifies deposits as unclaimed if the consumer has not made any transactions in the account for a period of 10 years or more. An RBI committee invests the funds given by various banks to the DEA in instruments in government securities. The revenue is used to pay back interest on deposits and to provide investor education.