Penalty can be charged on inoperative bank A/C

Do you have any inoperative bank account through which not a single transaction has been done for more than two years and you have forget then make sure either to close or activate that account. As recently banks are mandate to not to charge for reactivation of such an account but they have the right to continue charging for services such as maintenance of lockers and annual debit card fees. The Reserve Bank of India generally does not regulate service charges and penalties charged by individual banks.

In the directive issued on August 22, 2008, RBI in its definition of an inoperative accounts and unclaimed deposits has excluded “service charges levied by the bank or interest credited by the bank...''

Hence, if you do not maintain a minimum balance for a particular period in your savings account and if over the years, fees and charges reduce below the required cutoff, then you might have to even pay a penalty on the already reduced balance.

Therefore in spite of RBI instructions to banks to pay 3.5% savings bank rate of interest on inoperative accounts and matured fixed deposits, there can be chances that the balance may still end up depleting.

There is an advice for the consumers that they should keep a check on their accounts. Recently a Delhi resident, approached the National Consumer Helpline (NCH), a project supported by the ministry of consumer affairs, with an interesting complaint.

The complainant had an account in a southern bank which he left un-operated for a long time. Southern bank merged with a new-age private sector bank some years ago. At that time he had a comfortable balance of Rs 4,800 in his account, the minimum requirement being Rs 1,000. After the merger, however, the limit was raised to Rs 5,000 keeping in with the private bank's policies. "But he was not informed about the change and was slapped a penalty. Today he is left with a minus account," says NCH's Sanjeev Talwar.

The account holder adds, "First of all, they made my balance zero. But the most painful part is that when I approached the bank a year ago and requested them to close my account; they told me that my balance was negative, at Rs 3,000. Now they are asking for a penalty of Rs 10,000".

Therefore, inoperative accounts are a serious issue. As per the recent reports of the Reserve Bank, as on December 31, 2007, the unclaimed deposits stood at a huge Rs 1095.46 crore.

Taking this increase in a view as also the risk of frauds that inoperative accounts carry, RBI has also instructed banks to "play a more proactive role in finding the whereabouts of the account holders whose accounts have remained inoperative".

(Reserve Bank of India's spokesperson Alpana Killawala says that an inoperative account gets the status of a dormant account if it is not operated for more than 10 years. "The monies are then shifted to the bank's suspense account." To reactivate it, credentials of the account holder or his kin must be re-established).

Taking it in a positive sense, all banks TOI spoke to-HDFC Bank, ICICI Bank, State Bank of India, Axis Bank and Citibank-maintained that they do not charge any additional charges on an inoperative account.

K Ramakrishnan, the new chief executive at the Indian Banks' Association, also assures: "To my knowledge, there is no penalty". A senior banker admitted that charging of a nominal penalty, though, was common in the past.