The Union Finance Minister, Nirmala Sitharaman, has issued a fresh directive to banks and financial institutions. This directive pertains to millions of customers who are connected with these establishments, reported Times of India.
The Finance Minister’s directive requires banks and financial institutions to ensure that all their customers designate a beneficiary. This measure aims to minimize the total unclaimed funds. The Finance Minister’s decision follows the recent initiative by the Reserve Bank of India (RBI), which introduced a portal to uncover the substantial sum of unclaimed rupees amassed in banks.
Sitharaman said at the Global Fintech Fest (GFF), “I want the banking system, financial ecosystem, mutual funds, share market, everyone to keep in mind that when a customer transacts money. So organizations have to think about the future and decide where they (customers) nominate their successors, and give their names and addresses.”
The Minister added, “Of course, individuals can change their nominations any number of times. However, it is the responsibility of the organisation to ensure that a designated nominee is in place.”
Furthermore, she proposed that startups could play a pivotal role in supporting the government's efforts in this domain. She encouraged fintech companies to assume a prominent position in enhancing the cross-border payments system, considering the vast scope of India's market. She emphasized the significant transaction fees associated with international money transfers.
Unclaimed deposits with bank to the tune of ₹35,000 crores
As of February 2023, approximately ₹35,000 crore in unclaimed bank deposits have been shifted to the RBI. Simultaneously, the Investor Education and Protection Fund is safeguarding around 117 crore unclaimed shares, with an estimated value of approximately ₹40,000 crore.
The combined sum of such funds is reported to exceed one lakh crore rupees. Sitharaman additionally highlighted the risks posed by “tax haven countries” and the practice of “round tripping” money to the integrity of the responsible financial system. To address this issue, the RBI has introduced the Udgam Portal (UDGAM) as a means to securely return these funds to the customers and their rightful heirs.
The primary objective behind the introduction of this portal was to identify long-standing unclaimed funds held in banks. This user-friendly portal facilitates the efficient discovery of unclaimed amounts residing in various banks. The recently launched RBI portal provides information about unclaimed deposits in prominent institutions such as SBI, PNB, Central Bank of India, Dhanlaxmi Bank, South Indian Bank, DBS Bank India, and Citi Bank.