1. Background
Public Financial Management System (PFMS)[1] was developed as a tool to improve the payment and accounting and also reduce the parking of funds with the implementing agencies. Government of India (GoI) has made consistent efforts for complete implementation of PFMS in all its schemes both; Central Sector as well as Centrally Sponsored Schemes. All agencies operating government schemes are expected to be registered on PFMS with their dedicated bank account meant for the transactions of government business of the concerned scheme. Data of the unspent balances for the registered agencies is available on PFMS system. Though there are gaps in data and it may not be termed as comprehensive, it indicates that a huge amount of funds is lying in the bank accounts. There may be further balance lying in term deposits and bank accounts not registered in PFMS. Further, there are accounts with bank balances, which are not in the radar of even the senior state officials. These funds may be brought back to the treasury account and put to better use. The country is already facing resource crunch and such idle funds not getting leveraged is very disappointing and reflects poorly on the financial management. All efforts need to be made to identify idle funds, bring it back to the treasury of concerned government and use it in a more effective manner.
2. Objective
To ascertain the gravity of the matter and find back accounts as well as idle funds resting with them, a study was conducted in Ghazipur, Uttar Pradesh. This study is aimed to identify the accounts, suggest methods of getting the idle accounts closed by suitably withdrawing funds from there and suggest process through which funds shall be moved to State Treasury and GoI accounts. It has focused on Government Accounts in Public Sector Banks related to various State and Central schemes.
3. Methodology
Ghazipur, UP was chosen as pilot district being one of the backward districts of the country and may be considered as it is a reasonably representative district for rural India. State government officers were contacted and briefed about the objective. District Magistrate and all concerned District officials of Ghazipur and the respective bank representatives were interviewed regarding the status of the government accounts and the related issues. State officials were requested to provide information on the Government Accounts related to various State and Central Schemes in Ghazipur. Every district in India has a Lead Bank Manager (LDM) to coordinate the banking operation of the public sector banks in the district. LDM of the district was requested to get the list of all government bank accounts maintained by the banks. All departments were also asked to confirm the bank accounts maintained as per their records. All bank accounts registered in PFMS were also extracted through reports available in PFMS. Banks also maintain central subsidy sundry account and state subsidy sundry accounts. Banks were approached to confirm any government funds lying there in these accounts and common sundry account maintained by the banks. SUNDRY ACCOUNT is an account where miscellaneous items are recorded, e.g. infrequent transactions involving customers or suppliers that are not tracked in the normal course of business.
In most of the Banks, transactions in such accounts are to be monitored on day to day basis and got adjusted daily except in certain cases when there is a need to keep such balances in Sundry Accounts. Banks also keep some of the amounts in Imprest Accounts where there is a need to hold balances but these are also monitored on day to day basis and entries adjusted except for certain cases. These are Non Personal or Impersonal Accounts.
4. Process
State and district level officers were requested to follow a systematic approach to identify the accounts, agencies and idle funds under different schemes. Status of agencies handling government schemes/programs in Ghazipur was identified and scheme-wise bank accounts were listed. Reports as per PFMS were generated consisting of agency details, bank accounts and funds lying in them as per PFMS were prepared. The list was shared with the State and agencies and accounts were validated. The state was requested to provide further information related to Government Accounts of various State and central schemes implemented in the districts.
Chief Development Officer (CDO) is in charge of the development schemes in the districts in UP. Under his leadership the list of all the departments was prepared (as per Proforma B) for the departments receiving funds from the central Government. The list of concerned officers dealing with the schemes was also prepared with relevant details as per Proforma C and shared it with Lead District Manager (LDM) of the bank. All the officers in charge of respective schemes were informed and requested to provide the details. A list of closed and currently active schemes implemented in the district (as per Proforma D) with the respective bank accounts was prepared and shared with LDM. Based on the inputs from the scheme in charge and banks in the district, LDM prepared the department-wise government accounts. These accounts were checked and confirmed by the scheme in charge and gaps were filled. Headquarters or regional offices of the banks concerned were requested to confirm the details provided by the local branch in Ghazipur.
Out of the list of accounts, dormant and inactive accounts were identified and confirmed. All identified bank accounts had some balances and these balances were confirmed along with the Government Sundry account balances and any other sundry balances lying with the concerned bank. In the process, it emerged that amounts are lying in the sundry accounts of the banks also. Further, there were accounts which were closed but still reflected as active in the records. Similarly, there were accounts which are inactive or dormant for a long time and there is no transaction taking place from them. Sundry account balances were confirmed from the regional headquarters of the bank concerned.
5. Analysis and Observations
Through the efforts of the banks and the state officials, all the schemes related bank accounts dealing with government transactions were identified.
· There were 1850 accounts with the balance of Rs.2.83 billion identified which are related to various State and Central schemes implemented in Ghazipur (Bank-wise summary is attached as Annexure 1).
· Out of 1850 accounts, 1442 accounts with a balance of Rs.943.5 million are related to Central Schemes. Further analysis showed that 8 accounts with a balance of Rs.199.2 million are related to Department of Drinking Water and Sanitation (DoDWS) and Ministry of Panchayati Raj (Local Government) (MoPR) (Annexure 2).
· A list of agencies and respective accounts registered for the Central schemes of Ministry of Rural Development (MoRD), DoDWS and MoPR implemented in Ghazipur were extracted from the PFMS reports. There were 66 accounts with a balance of Rs.846.7 million which are related to the central schemes of MoRD, MoDWS and MoPR (Annexure 3).
· Further analysis revealed that there are gaps in both the lists of accounts generates through PFMS and sourced locally from the field through the state officials and banks.
· It was also noticed that there were 15 inactive accounts, 155 dormant accounts out of the list provided by State. A detailed account status-wise summary is attached as Annexure 4.
6. Findings and Way Forward
From the analysis, it is clear that huge amount of funds is lying idle in the bank accounts. In one district alone an amount of Rs.2.83 billion is lying primarily in idle or transitory accounts. In India, there are more than 700 similarly placed districts. Thus, it is estimated that about Rs.2 trillion is lying in either in an idle or unproductive manner.
Same may be put to use by bringing it to the nodal treasury account of the State. In the cases where schemes are already closed, such funds may be remitted back to the treasury of the State and central government by following a systematic approach to identify and get the funds back to the treasury account. Government of India officers of the Ministry of Finance may identify the district-wise bank accounts and funds lying in them as per PFMS. PFMS team will extract the list of accounts registered in PFMS for all districts with agency and scheme-wise details. The list may be shared with the States and agencies and accounts may be validated. States may be requested to provide the information related to Government Accounts of various State and central schemes implemented in the districts.
In order to ascertain the exact bank balance and transfer of funds from the dormant or inoperative accounts, banks need to follow the RBI guidelines and procedure. Extract of some relevant guidelines have been summarised and collated as Annexure-5.
States may initiate the process of idle fund reversal as per the guidelines of the Government to make the funds usable.
Proforma A: Government Account Details
S.No | Filed Name | Details |
1 | Bank Name |
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2 | Branch Name |
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3 | IFSC |
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4 | Account Number |
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5 | Account Type |
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6 | Account Status |
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7 | Active from |
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8 | Last Transaction Date |
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9 | Last Transaction Amount |
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10 | Available Balance (Actuals) |
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11 | Scheme Type |
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12 | Scheme Name |
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13 | Account Holder Name |
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14 | Department Name |
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15 | Account Registered in PFMS (Yes/No) |
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16 | PFMS Agency Unique Code |
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Proforma B: List of Government Departments
S.No | Field Name | Details |
1 | Department Name |
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2 | Heard of the Department Name |
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3 | Mobile Number |
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4 | Office Land Line |
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5 | Office Address |
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Proforma C: Department-wise list of concerned officers
Sl.No | Field Name | Details |
1 | Officer Name |
|
2 | Designation |
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3 | Department/Organization |
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4 | Mobile Number |
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5 | Email ID |
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6 | Reporting Officer Name |
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7 | Phone/Office Number |
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8 | Email ID |
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Proforma D: List of State or Central Government Schemes implemented in the district
S.No | Field Name | Details |
1 | Scheme Name |
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2 | Scheme Type (State or Central) |
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3 | Scheme status (Active or Closed) |
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4 | Scheme launch Year |
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5 | State Share |
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6 | Centre Share |
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Annexure 1
Bank-wise no of Govt. Accounts in Ghazipur and Balances | ||
Name of the Bank | No of Accounts | BALANCE (in millions) |
Union Bank of India | 805 | 20,25.64 |
Punjab National Bank | 42 | 5,03,17 |
ALLAHABAD BANK | 98 | 84.78 |
Oriental Bank of Commerce | 8 | 5.3 |
State Bank of India | 398 | 4.0 |
IDBI Bank | 45 | 4.3 |
Bank of Baroda | 20 | 6.6 |
Bank of India | 40 | 5.5 |
Kashi Gomti Samyut Gramin Bank | 383 | 8.0 |
HDFC BANK | 1 | 0 |
ICICI | 2 | 4.0 |
AXIS BANK | 1 | 7.8 |
BANDHAN BANK LTD | 4 | 4.6 |
INDIAN BANK | 1 | 2.7 |
Development Credit Bank Ltd. | 2 | 0.3 |
Grand Total | 1850 | 28,22.73 |
Source: List of accounts as per inputs from State Government of UP
Annexure 2
Details of bank accounts related to GoI Schemes of DoDWS and MoPR implemented in Ghazipur
Name of Bank | Account Number | IFSC | SCHEME NAME | SCHEME TYPE (State/Central) | STATUS OF ACCOUNT | BALANCE (in million) |
Punjab National Bank | 4483000100037462 | PUNB0992600 | Swachh Bharat Mision | Central and State | Active | 7.514 |
United Bank of India | 441502010064163 | UBIN0544159 | RKVY | CENTRAL | ACTIVE | 0.063 |
United Bank of India | 441502010064164 | UBIN0544159 | RKVY | CENTRAL | ACTIVE | 0.028 |
United Bank of India | 441502010064165 | UBIN0544159 | RKVY | CENTRAL | ACTIVE | 0.043 |
United Bank of India | 441502010064166 | UBIN0544159 | RKVY | CENTRAL | ACTIVE | 0.074 |
United Bank of India | 392702010337077 | UBIN0539279 | SBM-G EXTRA BUDGETARY RESOURCES | CENTRAL | ACTIVE | 9.802 |
United Bank of India | 392702010337436 | UBIN0539279 | PERFORMANCE INCENTIVE GRANT FUND SBM G | CENTRAL | ACTIVE | 107.027 |
United Bank of India | 392702010337704 | UBIN0539279 | GANGA ACTION PLAN | CENTRAL | ACTIVE | 74.725 |
Source: List of accounts as per inputs provided by State Government of UP
Annexure 3
Bank-wise Summary of accounts registered in PFMS for GoI schemes of MoRD, DoDWS and MoPR implemented in Ghazipur | |||
S.No | Bank Name | No of Accounts | Unspent Balance (Rs. in Actuals) |
1 | UNION BANK OF INDIA | 45 | 79,75,55,273.96 |
2 | ORIENTAL BANK OF COMMERCE | 6 | 2,48,27,186.00 |
3 | PUNJAB NATIONAL BANK | 5 | 2,19,63,925.15 |
4 | STATE BANK OF INDIA | 2 | 18,31,876.30 |
5 | BANK OF BARODA | 4 | 4,61,206.00 |
6 | ALLAHABAD BANK | 3 | 1,49,123.00 |
7 | BANK OF INDIA | 1 | 12 |
| Grand Total | 66 | 84,67,88,609.53 |
Source: PFMS
Annexure 4
Account Status-wise summary of Govt accounts in Ghazipur
Account Status | CENTRAL | Central and State | State | Not Specified | Total No of A/c | Total Balance in million | ||||
No of A/c | Balance in million | No of A/c | Balance in million | No of A/c | Balance in million | No of A/c | Balance in million | |||
ACTIVE | 1431 | 4 | 1 | 7.5 | 144 | 9.3 | 103 | 1.0 | 1679 | 1.8 |
Inactive | 2 | 0 | | | 13 | 9.1 | | | 15 | 9.1 |
DORMANT | 8 | 2 | | | 73 | 1.8 | 74 | 8.0 | 155 | 1.8 |
Closed | | | | | 1 | | | | 1 | |
Grand Total | 1441 | 9.359 | 1 | 0.75 | 231 | 14.003 | 177 | 4.790 | 1850 | 28.227 |
Source: List of accounts provided by State Government of UP
Annexure 5
GUIDELINES TO HANDLE DORMANT / INACTIVE ACCOUNTS – SCHEDULEDCOMMERCIAL BANKS
As per RBI guidelines vide circular no. Circular DBOD.No.Leg.BC.34/09.07.005/2008-09 dated August 22, 2008, paragraph 2(iv) of on Unclaimed Deposits/Inoperative Accounts in Banks in terms of which savings, as well as current account, should be treated as inoperative/dormant if there are no transactions in the account for over two years. Further, in terms of paragraph 2(vi), to classify an account as inoperative, both the types of transactions i.e. debit, as well as credit transactions induced at the instance of customers as well as third party, should be considered. (Copy of circular is attached).
Further, as per para vii of the circular, the segregation of the inoperative accounts is from reducing the risk of frauds etc. However, the customer should not be inconvenienced in any way, just because his account has been rendered inoperative. The classification is there only to bring to the attention of dealing staff, the increased risk in the account. The transaction may be monitored at a higher level both from preventing fraud and making a Suspicious Transactions Report. However, the entire process should remain un-noticeable by the customer.
Para viii of the circular suggests that operation in such accounts may be allowed after due diligence as per risk category of the customer. Due diligence would mean ensuring the genuineness of the transaction, verification of the signature and identity etc. However, it has to be ensured that the customer is not inconvenienced as a result of the extra care taken by the bank
Customer Due Diligence
RBI has given its master directions vide their circular RBI/DBR/2015-16/18 Master Direction DBR.AML.BC.No.81/14.01.001/ 2015-16 Master Direction - Know Your Customer (KYC) Direction, 2016 (Updated as on July 12, 2018) Copy attached).
RBI/2016-17/173 DBR.AML.BC.No.44/14.01.001/2016-17 dated December 06, 2016 - Requirement of customer due diligence and need for maintenance of records.
As per these guidelines, RBI has referred Banks to two of its earlier circulars for reactivation of dormant accounts. It is referred paragraph 24.2 (ix) of the Master Circular on ‘Customer Services in Banks’ dated July 1, 2015, requiring that operation in dormant accounts with banks may be allowed after due diligence as per risk category of the customer. As stated therein, ‘due diligence’ would mean ensuring the genuineness of the transaction, verification of the signature and identity etc.
RBI has also invited attention to Chapters VI and VII of their Master Direction on KYC dated February 25, 2016, addressed to all Regulated Entities (REs) in terms of which
- as part of the Customer Due Diligence Procedure, certified copies of officially valid documents for proof of identity and address are to be obtained while establishing an account-based relationship;
- REs shall, among others, take steps for preserving the customer account information including preservation of records of the identification of the customers and their addresses obtained while opening the account, for at least five years after the business relationship is ended.
Inoperative Accounts | |
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Unclaimed Deposits / Inoperative Accounts in Banks | |
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Requirement of customer due diligence and need for maintenance of records | |
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DBR-Master Circular on Customer Service in Banks 2015 dt 01.07.2015
24. Unclaimed Deposits / Inoperative Accounts in banks
24.1 Section 26 of the Banking Regulation Act, 1949 provides, inter alia, that every banking company shall, within 30 days after close of each calendar year submit a return in the prescribed form and manner to the Reserve Bank of India as at the end of each calendar year (i.e., 31st December) of all accounts in India which have not been operated upon for 10 years.
24.2 In view of the increase in the amount of the unclaimed deposits with banks year after year and the inherent risk associated with such deposits, banks should play a more pro-active role in finding the whereabouts of the account holders whose accounts have remained inoperative. Further several complaints were received in respect of difficulties faced by the customers on account of their accounts having been classified as inoperative. Moreover, there is a feeling that banks are undeservedly enjoying the unclaimed deposits, while paying no interest on it. Keeping these factors in view, the instructions issued by RBI have been reviewed and banks are advised to follow the instructions detailed below while dealing with inoperative accounts:
(i) Banks should make an annual review of accounts in which there are no operations (i.e., no credit or debit other than crediting of periodic interest or debiting of service charges) for more than one year. The banks may approach the customers and inform them in writing that there has been no operation in their accounts and ascertain the reasons for the same. In case the non- operation in the account is due to shifting of the customers from the locality, they may be asked to provide the details of the new bank accounts to which the balance in the existing account could be transferred.
(ii) If the letters are returned undelivered, they may immediately be put on enquiry to find out the whereabouts of customers or their legal heirs in case they are deceased.
(iii) In case the whereabouts of the customers are not traceable, banks should consider contacting the persons who had introduced the account holder. They could also consider contacting the employer / or any other person whose details are available with them. They could also consider contacting the account holder telephonically in case his Telephone number / Cell number has been furnished to the bank. In case of Non Resident accounts, the bank may also contact the account holders through e-mail and obtain their confirmation of the details of the account.
(iv) A savings as well as current account should be treated as inoperative / dormant if there are no transactions in the account for over a period of two years.
(v) In case any reply is given by the account holder giving the reasons for not operating the account, banks should continue classifying the same as an operative account for one more year within which period the account holder may be requested to operate the account. However, in case the account holder still does not operate the same during the extended period, banks should classify the same as inoperative account after the expiry of the extended period.
(vi) For the purpose of classifying an account as ‘inoperative’ both the type of transactions i.e., debit as well as credit transactions induced at the instance of customers as well as third party should be considered. However, the service charges levied by the bank or interest credited by the bank should not be considered.
(vii) There may be instances where the customer has given a mandate for crediting the interest on Fixed Deposit account and/or crediting dividend on shares to the Savings Bank account and there are no other operations in the Savings Bank account. Since the interest on Fixed Deposit account and/or dividend on shares is credited to the Savings Bank accounts as per the mandate of the customer, the same should be treated as a customer induced transaction. As such, the account should be treated as operative account as long as the interest on Fixed Deposit account and/or dividend on shares is credited to the Savings Bank account. The Savings Bank account can be treated as inoperative account only after two years from the date of the last credit entry of the interest on Fixed Deposit account and/or dividend on shares, whichever is later, provided there is no other customer induced transaction.
(viii) Further, the segregation of the inoperative accounts is from the point of view of reducing risk of frauds etc. However, the customer should not be inconvenienced in any way, just because his account has been rendered inoperative. The classification is there only to bring to the attention of dealing staff, the increased risk in the account. The transaction may be monitored at a higher level both from the point of view of preventing fraud and making a Suspicious Transactions Report. However, the entire process should remain un-noticeable by the customer.
(ix) Operation in such accounts may be allowed after due diligence as per risk category of the customer. Due diligence would mean ensuring genuineness of the transaction, verification of the signature and identity etc. However, it has to be ensured that the customer is not inconvenienced as a result of extra care taken by the bank.
(x) There should not be any charge for activation of inoperative account.
(xi) Banks are also advised to ensure that the amounts lying in inoperative accounts ledger are properly audited by the internal auditors / statutory auditors of the bank.
(xii) Interest on savings bank accounts should be credited on regular basis whether the account is operative or not. If a Fixed Deposit Receipt matures and proceeds are unpaid, the amount left unclaimed with the bank will attract savings bank rate of interest.
24.3 Banks may also consider launching a special drive for finding the whereabouts of the customers / legal heirs in respect of existing accounts which have already been transferred to the separate ledger of ‘inoperative accounts’.
24.4 Display list of Inoperative Accounts: Banks should, in addition to the instructions contained above, play a more pro-active role in finding the whereabouts of the accountholders of unclaimed deposits/ inoperative accounts. Banks are, therefore, advised that they should display the list of unclaimed deposits/inoperative accounts which are inactive / inoperative for ten years or more on their respective websites. The list so displayed on the websites must contain only the names of the account holder(s) and his/her address in respect of unclaimed deposits/inoperative accounts. In case such accounts are not in the name of individuals, the names of individuals authorized to operate the accounts should also be indicated. However, the account number, its type and the name of the branch shall not be disclosed on the bank’s website. The list so published by the banks should also provide a “Find” option to enable the public to search the list of accounts by name of the account holder.
Banks should also give on the same website, the information on the process of claiming the unclaimed deposit/activating the inoperative account and the necessary forms and documents for claiming the same. Banks are required to have adequate operational safeguards to ensure that the claimants are genuine.
24.5 Strengthening the Regulatory Framework for Unclaimed Deposits
With a view to further strengthen the regulatory framework for inoperative accounts and unclaimed deposits, banks are advised to put in place a Board approved policy on classification of unclaimed deposits; grievance redressal mechanism for quick resolution of complaints; record keeping; and periodic review of such accounts. The first periodic review of unclaimed deposits/inoperative accounts should be put up to their respective bank Boards by September 30, 2012.
24.6 Treatment of certain savings bank accounts opened for credit of Scholarship amounts and credit of Direct Benefit Transfer under Government Schemes
State and Central Governments have expressed difficulties in crediting cheques/Direct Benefit Transfer/Electronic Benefit Transfer/Scholarships for students, etc. into accounts/Accounts with zero balance opened for the beneficiaries under various Central/State Government schemes but had been classified as dormant/inoperative due to non-operation of the account for over two years.
Keeping the above in view, banks are advised that they may allot a different “product code” in their CBS to all such accounts opened by banks so that the stipulation of inoperative/dormant account due to non-operation does not apply while crediting proceeds as mentioned above.
In order to reduce the risk of fraud etc., in such accounts, while allowing operations in these accounts, due diligence should be exercised by ensuring the genuineness of transactions, verification of signature and identity, etc. However, it has to be ensured that the customer is not inconvenienced in any manner.
24.7 Treatment of accounts opened for credit of Scholarship Amounts under Government Schemes
Bombay High Court has brought to our notice that banks fix a limit on total credits in zero balance accounts opened for students studying in primary, secondary / higher secondary schools and technical institutions. Resultantly, in cases where scholarship amounts exceed the credit limit, banks do not allow the credit and return the amount to the disbursement account of the Government. Further, in some cases banks are reported to have closed zero balance accounts unilaterally without intimating student beneficiaries concerned. Instances of banks refusing to open zero balance account for students have also been brought to our notice.
As directed by the Bombay High Court, banks are advised to ensure that accounts of all student beneficiaries under the various Central/State Government Scholarship Schemes are free from restrictions of ‘minimum balance’ and ‘total credit limit’.
[1] https://pfms.nic.in/static/NewLayoutCommonContent.aspx?RequestPagename=Static/Implementation.aspx
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