We are living in a digital age, where we expect our money to be at our fingertips, but the reality is far from true. Within the Indian Banking system sits ₹78,000 crores in Depositor Education and Awareness Fund (DEAF). DEAF accounts arise from unclaimed or dormant bank deposits. An account is classified as dormant when it remains inactive for a period of 10 years after which the Bank is legally required to transfer the deposits to RBI's DEAF account; then used for Depositor education and financial literacy. Even after the money is transferred to RBI, the original depositor or their legal heir retains the right to claim their money. By submitting KYC documents to the bank and fulfilling the identity requirements these funds can be claimed by the depositors or their legal heirs.

Why these amounts keep growing over the years?

The amounts in the DEAF are increasing significantly over the years, reaching over ₹78,000 crore by 2024. Their are factors that contribute to this influx:

Forgotten Accounts: People often open multiple bank accounts in the course of their life, for jobs, temporary residencies, or specific investments. Corporate accounts with significant balances are forgotten during liquidation. These accounts are rarely consolidated or closed.

Legal heirs: In many cases the depositors fail to inform their legal heirs of these bank accounts or investments often unaware of the existence of these assets, and they remain dormant until they are swept into DEAF.

Administrative Friction: When customers change their address or phone numbers without updating their bank records often lose touch with their accounts.

Expansion Inertia: As India’s banking sector has expanded and financial inclusion has increased, the sheer number of bank accounts has skyrocketed. A larger number of total accounts statistically leads to a higher volume of dormant accounts over time.

Banks hold these accounts at a low interest cost, with no financial incentive to aggressively trace these accounts despite the administrative burden. The increase in unclaimed deposits over time can affect profitability due to higher costs, risks and compliance issues. These deposits are idle capital that sit on the balance sheet but ineffective overtime.

While initiatives like the RBI’s UDGAM portal and the “100 Days - 100 Pays” are being introduced by RBI but the core problem is not being addressed: Banks' inability in taking care of these accounts or customers during the 10-year gap and keeping the burden of discovering these accounts on the customer.

To truly solve the crisis, we need a 2-pronged, proactive approach:

1. Stopping the Inflow (Preventative Measures) While banks cannot be penalized as the customers can slip out due to multiple reasons the Banks will not take any responsibility of reaching out to the customer without any incentive. By mandating that banks cannot treat deposits as "low-cost capital" once an account hits a 2-year dormancy threshold, we remove the benefit of inactivity. This would force institutions to treat account maintenance as a priority rather than a passive duty.

2. Accelerating the Outflow (Simplified Recovery) The documentation barrier is too high. For small-value accounts (e.g., under ₹10,000), we should allow self-attested affidavits from local municipal authorities in lieu of complex death certificates. Furthermore, a portion of the interest earned on the DEAF should be set aside to reward the branch staff for verifying and reuniting owners with their dormant funds. Prioritizing the reconciliation of high-value dormant accounts, by focusing on larger balances first, banks can maximize the economic impact. Establish a standardized digital verification framework for legal heirs residing abroad. Digitalizing this process will not just reduce the customers burden but also help with the reconciliation of the DEAF accounts.

Digital transformation in banking should not stop at the transaction, it must extend to the custody of the customer. It is time we stop asking customers to "find" their money and start building systems that ensure the money finds its way back to its true owner.

At WINMORE SOLUTIONS, we provide the strategic tools to turn these complex competitive trends into a clear, high-performance roadmap for your Banking institution.

If you are ready to stop reacting to market pressures and start leading, let’s collaborate. Contact us for a tailored, deep-dive analysis of your specific target geographies, and let us guide your bank on its next step in pursuit of banking excellence.

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