Banking Amendment Bill will reduce fraud and strengthen the economy

SATISH SINGH

The Banking Amendment Bill 2024 has been passed in the Lok Sabha on 3 December 2024, under which a total of 19 amendments will be made in the banking sector and for this, amendments will be made in laws like Reserve Bank of India Act 1934, Banking Regulation Act 1949, State Bank of India Act 1955 etc.

After the amendments, the amount of dividend, shares, interest and matured bonds not claimed for 7 years can be transferred to Investor Education and Protection Fund i.e. IEPF, which will reduce the incidents of fraud and the real claimants of the deposited amount will be able to easily withdraw the amount invested through IEPF, because the process of withdrawal of such stuck amount will be simple and easy.

The most important of these amendments is the provision of adding 4 nominees instead of 1 in the bank account, because at present the provision of nominating only 1 nominee is rapidly increasing the frequency of fraud, cybercrime, money laundering and terrorist incidents in the country.

As of today, there are lakhs of such accounts in the banks of the country, which do not have any nominee. In many cases, such accounts become inactive after 2 years due to the death of a nominated nominee or due to non-claim of the deposited amount by him. By March 2024, there was no claimant for an amount of about Rs 78,000 crore in the banks. According to the government, by the end of 2023, more than Rs 1 lakh crore was deposited in the inactive accounts of the bank, out of which there was no claimant for an amount of Rs 42 thousand crore. At present, the amount not claimed is increasing by 28 percent on an annual basis.

Certainly, such a situation is worrying. The government wants constant monitoring of inactive accounts. For this, the central bank has directed the banks to issue a report of inactive accounts on a quarterly basis, because corrective steps can be taken in the matter only by being aware of the latest situation.

Usually, when no withdrawal is made in an account for 2 years, it turns into a dormant account and the possibility of fraud in such accounts increases a lot. Also, such accounts are also used for money laundering, which has materialized by stealing the identity of the account holder, with the help of brokers, bank employees etc.

Pradhan Mantri Jan Dhan Yojana has played an important role in materializing the concept of financial inclusion and digitalization in the country. As of November 13, 2024, the number of Jan Dhan accounts opened across the country was around 53.99 crore, out of which the number of inactive accounts was around 11 crores. About Rs 2.35 lakh crore was deposited in Jan Dhan accounts. Obviously, the existence of such inactive accounts and the deposit of a large amount in them increases the possibility of fraud, money laundering & terrorist activities. According to a report of the Home Ministry, during the first 9 months of 2024, account holders have been cheated of Rs 11,333 crore due to cyber fraud.

The Reserve Bank of India is extremely concerned about the increasing number of dormant accounts in banks and to prevent such incidents, it has instructed banks to adopt simple procedures like mobile, internet banking, non-home branch and video KYC for KYC of such accounts. The central bank has also said that the amount deposited in such accounts under various schemes of the central or state governments should not be stopped, so that when the beneficiary or his family members withdraw the money after completing the KYC process, they do not suffer any financial loss.

It is worth mentioning that due to accounts becoming dormant, the account holders suffer many losses. The bank stops depositing the interest amount in such accounts. Due to not depositing money in the bank, their money is always at risk, that is, there is a high possibility of it being stolen. They are also unable to take advantage of online transactions etc., & e-commerce.

Dormant accounts are most targeted for identity theft. Once the identity is stolen, such accounts are used to carry out money laundering, terrorist activities, fraud etc. Cases of misuse of such accounts for unauthorized transactions by bank employees are also seen from time to time.

However, there are many benefits of activating dormant accounts. Active accounts accelerate both financial inclusion and digitalization. Money remains safe and there is no fear of money theft in the mind. Bank deposits generate income in the form of interest. If the account holder is eligible for various government schemes, he or she continues to get their benefits. The customer can make online transactions. They can buy the product of his choice from any country in the world by e-commerce companies like Amazon, Flipkart, Myntra etc. They can also transfer money to any corner of the world if needed, etc.

Maintenance or inactivity charges are levied on dormant accounts. The account holder is deprived of the benefits of online banking or facilities like debit and credit cards. Many times, the unclaimed amount is deposited in the educational and awareness fund run by the central bank, so that such amount can be used in welfare works. However, the loss due to this provision is to the actual investor of bank deposits or his heir.

In conclusion, it can be said that today the economy is not getting any benefit due to billions of rupees lying in dormant accounts. If this money was used or spent, then economic activities would have accelerated, which would have boosted development, people would have got employment, they would have become financially strong, etc.

It is very easy to activate dormant accounts. The account can be made active by withdrawing only Rs 100, but before this the account holder has to submit self-attested identity and residence certificate along with KYC form to the bank.

In such a situation, the proposal of keeping 4 nominees in 1 account in the banking amendment by the government is appreciable. This initiative can prove to be effective in stopping the rate at which the percentage of anonymous deposits is increasing in banks today, but for this, customers or the public will also need to be made aware and educated about nominating more than one nominee. There is also great need to accelerate financial literacy. Along with this, the bank account holders will also need to always be cautious and vigilant to avoid fraud.

(Satish Singh is an Ahmedabad Based Senior Columnist. Views are personal. Email: singhsatish@sbi.co.in)