Rs 26,000 crore left unclaimed in bank, provident fund accounts

Investors have not claimed over Rs 26,000 crore from their provident fund (PF) accounts, insurance companies and bank fixed deposits, data released by the finance ministry revealed. A large part of the funds — over Rs 22,600 crore — is lying unclaimed with the Employees Provident Fund Organization (EPFO). New rules stipulate that those who have not transferred or shut their accounts for three years are not even entitled to receive interest on it. As a result, their benefits are passed on to the other EPFO subscribers.

Minister of state for finance Namo Narain Meena told Parliament that over Rs 3,000 crore was lying with insurance companies. Within this, he did not specify if the amount included what individuals invested in unit-linked insurance plans (ULIP). Funds lying unclaimed with insurance companies remain in the policyholder account, which is invested in the market and returns on this are shared with policies that are still in operation in the form of bonuses.

Several insurance companies were, however, flouting the norms and were transferring the Ulip funds into the shareholder account, which benefited the promoters. Meena said the insurance regulator has now advised insurers that unclaimed money would not be appropriated or written back. In case of insurance, several policyholders stop paying premium after a few years although the policy term may be 15-20 years.

The government said that in case of banks, at the end of March, 2012, over Rs 425 crore was lying as unclaimed funds in fixed deposits. It, however, did not provide any estimate on the funds that are lying unclaimed in bank savings accounts, which are unclaimed for several years. Typically, an account becomes inoperative if no money is deposited or withdrawn for a specified period.

For unclaimed funds in fixed deposits, the government has introduced the Banking Laws (Amendment) Bill, 2011 which has a provision for setting up a "Depositor Education and Awareness Fund" to take over inoperative deposit accounts which have not been claimed or operated for 10 years or more.

The minister also said that the Ministry of Labour and Employment has informed the government that the amount lying in the inoperative accounts under the EPFO cannot be utilized except for the settlement of the members' account.