Confiscating dormant bank accounts
Monetary authorities have decided to consider
deposits in savings accounts including Residential Foreign Currency
Accounts and Non-Resident Foreign Currency Accounts that have been
inactive for 10 years (since December 31, 1995) as disowned property.
The amendment to the Banking Act is to recover
non-performing accounts of commercial banks and use its provisions
relating to disowned/abandoned property to access the dormant funds.
According to clauses of the banking regulations
all commercial banks are required to disclose to the Central Bank
any disowned/abandoned deposits. Thus, the first report by all registered
commercial banks on dormant accounts for the 10 years ending December
31, 2005 is pending.
Before the confiscation of the defunct depositary
accounts the commercial banks have been instructed to inform the
respective account holders in writing and if no response is received
to the letter within 30 days the account is to be confiscated.
Officials say money in defunct accounts would
be credited to a separate account for the utilisation of government
activities but claimed that banks are obligated to reimburse them
when demanded by depositors.
However, what is unclear is the interest component
of confiscated and subsequently reimbursed deposits. Logically,
the commercial banks should allow any withdrawal of deposits inclusive
of any accrued interest upon demand and the government/Central Bank
should reimburse the full amount (the initial deposit plus the interest
portion) to the commercial banks. Nevertheless, legitimate owners
of dormant accounts would still have to follow a lengthy process
in order to claim their rightful monies.
Officials say the amount in dormant accounts exceeds
Rs 3 billion and is about 1 percent of savings, time and foreign
currency deposits. These monies could be used by the government
and of which a portion would not be claimed nor reimbursed at all.
From the government/national view point any abandoned/disowned
property should be transferred as property of the government rather
than a privately-held institution. Also the system helps the government
to generate finances at a lower cost due to unclaimed abandoned/disowned
money which may not involve any principal or interest payment. A
commercial bank may argue for the simple reason of losing the benefit
of dormant/defunct accounts and for going through the tedious process
in case of a reimbursement.
However, proper drafting of such a monetary system
is mandatory for a country’s economic health. Policies should
be drafted to encourage and reinforce the financial system rather
than creating uncertainty amongst the general public. In Argentina,
a restriction on money withdrawals erupted in an economic and social
crisis. Thus, before implementing a doubtful policy, proper educatory
campaigns by the authorities are essential to restore the public’s