RBI’s Bold Move To Unlock Unclaimed Deposits

The Reserve Bank of India (RBI) launched a year-long incentive scheme from October 2025 to September 2026 to reduce unclaimed deposits in banks. This follows a new directive simplifying the settlement of deceased persons’ accounts. The government also started a nationwide campaign titled Your Money, Your Right to encourage people to claim idle funds totalling nearly ₹1.84 lakh crore. These efforts aim to return vast sums trapped in dormant accounts and financial instruments to rightful owners or nominees.

Background of Unclaimed Funds in India

India holds large sums in unclaimed financial assets across banks, insurance companies, provident funds, and mutual funds. These idle funds include ₹75,000 crore in the RBI’s Depositor Education and Awareness (DEA) Fund, ₹1.1 lakh crore in the Investor Education and Protection Fund (IEPF), and amounts with insurance and mutual fund bodies. The total idle funds, including those in long pipelines before transfer, may exceed ₹3.7 lakh crore, more than 1% of India’s GDP.

Regulatory Measures Taken

The RBI’s recent steps include a 2025 incentive scheme offering 5-7.5% payments to banks on settled inoperative accounts, capped between ₹5,000 and ₹25,000 depending on account dormancy. The RBI also issued a September 2025 notification to streamline claims for deceased persons’ accounts. Earlier, the RBI set up the DEA Fund in 2014 and launched the Unified Database for Unclaimed Deposits in 2023 to track such funds. The IEPF Authority, created in 2016, manages unclaimed securities and dividends under the Companies Act and SEBI rules. The Insurance Regulatory and Development Authority of India (IRDAI) strengthened grievance redressal and claim settlement processes in 2022.

Challenges in Claiming Idle Funds

Despite regulations, unclaimed funds continue to grow due to poor implementation by service providers. Many claimants face difficulties in closing accounts or settling claims. Deficiencies in service delivery and lack of coordination between regulators and financial entities widen the gap between policy and practice. The long waiting periods before funds transfer to dedicated accounts add to the accumulation. The RBI’s new incentive plan aims to motivate banks to expedite payouts and reduce this backlog.

Impact of Unlocking Idle Financial Assets

Releasing these funds could boost consumption and investment. It will improve the financial position of millions of savers, especially underprivileged workers dependent on provident funds and insurance. Enhanced access to dormant accounts through technology upgrades, such as the Employees’ Provident Fund Organisation’s new platform, will facilitate smoother withdrawals and settlements. Effective utilisation of idle funds can contribute positively to India’s economic growth.

Significance of the Your Money, Your Right Campaign

This campaign marks the fiduciary responsibility of financial institutions towards depositors and investors. It focuses on three pillars – awareness, accessibility, and action. The initiative urges citizens to actively claim their money and helps build trust in the financial system. It also sensitises service providers to their duty in safeguarding and returning unclaimed assets promptly.

Future Outlook and Regulatory Dynamics

The RBI’s carrot-and-stick approach could redefine the regulator-regulated relationship. Incentives alongside strict compliance directives may improve service provider responsiveness. However, this shift may also bring new challenges in enforcement and coordination. Continuous monitoring and technological integration will be crucial to sustaining progress in reducing unclaimed financial assets.

Questions for UPSC:

1. Critically analyse the role of financial regulators like the Reserve Bank of India and Securities and Exchange Board of India in protecting investor interests with suitable examples.
2. Explain the concept of fiduciary responsibility in financial institutions and its significance in the context of unclaimed deposits and investor protection.
3. What are the challenges in implementing financial inclusion policies in India? How can technology help overcome these challenges?
4. With suitable examples, comment on the impact of idle financial assets on the Indian economy and suggest measures to mobilise these resources effectively.

Answer Hints:

1. Critically analyse the role of financial regulators like the Reserve Bank of India and Securities and Exchange Board of India in protecting investor interests with suitable examples.

1. RBI regulates banks, ensures depositor protection, and manages unclaimed deposits via DEA Fund and incentive schemes.
2. SEBI protects investors in securities markets, mandates transfer of unclaimed dividends/securities to IEPF after 7 years.
3. Both regulators have created centralized databases and grievance redressal mechanisms to track and resolve unclaimed funds.
4. Examples – RBI’s 2025 incentive scheme for banks to expedite payouts; SEBI’s rules for companies to transfer idle securities to IEPF.
5. Challenges include poor ground-level implementation, service provider inertia, and long pipelines delaying fund release.
6. Regulators continuously update policies (e.g., RBI’s 2023 Unified Database, SEBI’s stricter compliance) to enhance investor protection.

2. Explain the concept of fiduciary responsibility in financial institutions and its significance in the context of unclaimed deposits and investor protection.

1. Fiduciary responsibility means holding and managing clients’ funds with utmost good faith and care.
2. Financial institutions act as trustees, obligated to safeguard and return depositors’ or investors’ money promptly.
3. Unclaimed deposits reflect failure in fiduciary duty due to delays, poor service, or lack of awareness.
4. Significance – Protects investor rights, builds trust, and ensures rightful claimants receive their funds without undue hassle.
5. Initiatives like Your Money, Your Right campaign emphasize fiduciary accountability and encourage claimants to act.
6. Regulatory mandates compel institutions to transfer unclaimed funds to dedicated accounts, reinforcing fiduciary norms.

3. What are the challenges in implementing financial inclusion policies in India? How can technology help overcome these challenges?

1. Challenges – Poor awareness, documentation hurdles, service provider inefficiencies, and lack of accessibility in remote areas.
2. Long waiting periods and complicated claim settlement processes discourage beneficiaries from accessing funds.
3. Fragmented coordination among regulators, banks, insurance, and securities entities hampers smooth implementation.
4. Technology enables centralized databases (e.g., RBI’s Unified Database for Unclaimed Deposits) improving transparency and tracking.
5. Digital platforms (e.g., EPFO’s Version 3.0) simplify withdrawals, claims, and grievance redressal for millions of users.
6. Mobile banking, Aadhaar-based KYC, and online awareness campaigns expand reach and ease access to financial services.

4. With suitable examples, comment on the impact of idle financial assets on the Indian economy and suggest measures to mobilise these resources effectively.

1. Idle assets (~₹3.7 lakh crore) represent over 1% of GDP, locking away capital that could boost consumption and investment.
2. Unclaimed funds reduce liquidity flow, slow economic growth, and weaken financial security of depositors/investors.
3. Example – Large dormant provident fund balances affect underprivileged workers’ welfare and financial stability.
4. Measures – Regulatory incentives (e.g., RBI’s payout scheme), awareness campaigns (Your Money, Your Right), and tech upgrades.
5. Strengthening grievance redressal, simplifying documentation, and enforcing strict compliance by service providers are essential.
6. Integrating databases across sectors and continuous monitoring can ensure timely release and utilisation of idle funds.