In a significant move to reduce the volume of dormant assets, public sector banks (PSBs) in India have successfully returned Rs 6,800 crore in unclaimed deposits to rightful claimants over the past six months. M. Nagaraju, Secretary of the Department of Financial Services (DFS), announced these figures during a high-level performance review meeting held this week to evaluate the operational and financial milestones of state-run lenders for the 2025–26 fiscal year.
The Growing Challenge of Unclaimed Deposits
Unclaimed deposits refer to savings or current accounts that have remained inactive for ten years or more, or term deposits that have not been claimed within ten years of the date of maturity. These funds are typically transferred by banks to the Depositor Education and Awareness (DEA) Fund, maintained by the Reserve Bank of India (RBI).
The accumulation of these funds has been a long-standing concern for financial regulators. According to RBI data, the total amount of unclaimed deposits transferred by banks to the DEA Fund surged significantly in recent years, prompting the central bank to launch the ‘UDGAM’ (Unclaimed Deposits – Gateway to Access Information) portal.
Strategic Review and Operational Efficiency
During the review meeting, Secretary M. Nagaraju emphasized that the liquidation of these dormant accounts is a top priority for the government. The discussion focused on streamlining the verification process for beneficiaries and ensuring that banks proactively reach out to account holders who have lost contact with their banking institutions.
Financial experts note that the success of this six-month drive is largely attributed to the digitization of Know Your Customer (KYC) processes. By integrating advanced data analytics, banks are now better equipped to trace the legal heirs of deceased account holders or identify long-term dormant account holders who may have forgotten their legacy investments.
Broader Industry Implications
For the banking industry, the repatriation of these funds serves two critical purposes. First, it strengthens consumer trust by ensuring that citizens have unfettered access to their financial savings. Second, it reduces the administrative burden on banks that must maintain records of inactive accounts indefinitely.
Industry analysts suggest that this trend of returning unclaimed funds will likely continue as banks face increased pressure from the Ministry of Finance to optimize their operational efficiency. The government’s focus is currently shifting toward deeper penetration of digital banking services, which inherently reduces the likelihood of future accounts becoming ‘unclaimed’ due to lack of communication.
Future Outlook and Monitoring
Moving forward, stakeholders should monitor how PSBs leverage the UDGAM portal to further reduce the backlog of unclaimed assets. The government is expected to continue its quarterly review mechanism, potentially introducing stricter timelines for banks to settle claims upon receipt of valid documentation. As digital literacy increases, the emphasis will likely pivot from merely locating funds to preventing the dormancy of accounts through automated notifications and integrated financial literacy programs.
