Banking sector seeks clarity on dormant account fund transfers

11 December 2015 05:25 am - 0 - {{hitsCtrl.values.hits}}

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By Shabiya Ali Ahlam
As the banking sector continues to remain in the dark on the specifics of the move to transfer monies in dormant bank accounts to the Consolidated Fund, the industry stressed it required clarity on a number of elements on the said proposal.
“We in the banking industry will need clarification on this because the word dormant itself and in which context it has been used is something that might be useful to know very specifically rather than us speculating,” Sri Lanka Banks’ Association (SLBA) Chairman and MD/CEO Hatton National Bank (HNB) Jonathan Alles said when Mirror Business inquired as to how the transfer and withdrawal process would work.
He shared the industry will meet with the Central Bank shortly to gain clarity in this regard and to discuss few
other concerns.
Finance Minister Ravi Karunanayake in Budget 2016 proposed to transfer all funds lying in dormant bank accounts to the Consolidated Fund by January 1, 2016.
While the money would be held in the Consolidated Fund as long as the accounts remain inactive, the Central Bank would release the same when a customer wished to reactivate the account.
Acknowledging that having a dormant account is not uncommon as people are not expected to transact on a regular basis when the motive is to save , Alles stressed it is not only imperative to define the term ‘dormant’, but it is also important to clearly specify activities that would render accounts as active.
Existing provisions in the Banking Act require a period of 10 years for customer property, including monies lying in inoperative accounts of commercial banks, to be transferred to the Central Bank as abandoned property.
Prior to such transfers, the Act requires Banks to give adequate notice to such account holders, including publication of the lists in national newspapers, to contact their respective banks and reactivate.
According to National Development Bank (NDB) Director/Chief Executive Officer Rajendra Theagarajah the process appears to be effective as a window of 10 years generally seems reasonable before such dormant accounts are classified as abandoned property.
Banks have internal controls in place to identify the authenticity of the customer identity before reactivating such dormant accounts to ‘active’ status.
Unless banks are allowed to retain a percentage to make a refund, just as for abandoned property, where 10 percent is held back for refund while the remaining is transferred to the Central Banka, SLBA Secretary General Upali de Silva said customers would experience a delay during withdrawals.
Noting the proposal is applicable to saving accounts, current accounts, and fixed deposits, he pointed out that for the former two being inactive from one to two years would be considered as dormant, whereas the latter would be considered inactive if no renewal instructions are given at the time of maturity.
Silva added that only debits (withdrawals) would be taken into consideration to classify accounts as active.
Unlike the abandoned property, the proposal will not be implemented through legislation but via a Central Bank directive.

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Banking sector seeks clarity on dormant account fund transfers

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