Depositors should track maturity dates of term deposits
Until now, unclaimed deposits attracted the rate of interest applicable to savings deposits which are usually lower than fixed deposit rates
image for illustrative purpose
The Reserve Bank of India's (RBI) recent ruling says if a term deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract a rate of interest as applicable to savings account or the contracted rate of interest on the matured term deposit (TD), whichever is lower.
Term deposits are low-risk deposits such as recurring, cumulative, annuity, reinvestment deposits and cash deposits. They are kept with the bank for a fixed tenure. The depositor can withdraw the sum when it is matured.
Want to know how does this ruling affect customers?
For instance, if customer x invests in a fixed deposit for a five-year tenure, the bank will give him/her an interest rate applicable when the money was deposited with the bank after maturity. If it was three percent and x doesn't claim it after it has matured, the bank earlier would revert to a rate of interest applicable to savings account. Until now, unclaimed deposits attracted the rate of interest applicable to savings deposits which are usually lower than fixed deposit rates.
What can customers do?
Talking to Bizz Buzz, M Narendra, former CMD, IOB, said: "As against earlier direction of paying interest at Savings rates on deposits which are matured and unclaimed RBI has currently modified that such term deposits which are matured and unclaimed deposits will attract either the Savings deposit rates or the contracted term deposit rates, whichever is less. Ideally depositors should use. The auto renewal option at the time of making fixed deposits, So that the Banks will automatically renew the deposits on maturity. Otherwise, depositors will have to keep a track on the maturity dates of the deposits and exercise their option to renew or claim the deposits thereby avoiding the same to be kept unclaimed."
However, there is no clear-cut definition of unclaimed deposit. In case a savings bank account is not claimed for a longer period of time, then the banks block the account. Another problem was some of the new generation private sector banks are offering interest rates on term deposits higher than the interest rate provided by them on savings bank account. Though it is not the case with public sector banks. For example, SBI is offering interest rate of 2.75 per cent on saving bank accounts.
