Indian Institutions can seek financial assistance from the Depositor Education and Awareness Fund

            Reserve Bank of India has recently released the guidelines on Criteria for Institutions, who can seek Financial Assistance from the Depositor Education and Awareness Fund

Key features

i) Objectives and Scope of activities: To grant financial assistance to institutions/ organisations/ associations for taking up various activities relating to promoting bank depositors’ education and awareness.

ii) Eligible entities: The institutions/ organisations/ associations, viz., not for profit public charitable trusts, corporates, universities, etc., who are already engaged in activities relating to bank depositors’ education and awareness or proposing to take up depositors’ education programmes, organising seminars, symposia, etc., including research activities, can be considered for assistance.

iii) Procedure for application: Entities may apply in the prescribed format given as Annex to the Guidelines along with necessary documents/ information as per the list of documents indicated in the application form, to The Chief General Manager, Department of Banking Regulation, Reserve Bank of India, Central Office, 12th Floor, Central Office Building, Shahid Bhagat Singh Road, Mumbai – 400001.

iv) In the first tranche Applications will be received at the above address till the close of business as on February 27, 2015.

Background

Pursuant to the amendment of The Banking Laws (Amendment) Act, 2012, Section 26A has been inserted in the Banking Regulation Act, 1949 that empowers the Reserve Bank to establish a fund called Depositor Education and Awareness Fund (Fund).

The Scheme envisages registration of institutions, organisations or associations and grant of financial assistance to them for promotion of depositors’ interests.

 The Fund has been created and all banks (Scheduled Commercial Banks including Regional Rural Banks and Local Area Banks /Urban Co-operative Banks / State Co-operative Banks /District Central Co-operative Banks) have been advised to transfer inoperative deposit accounts which have not been claimed or operated for a period of ten years or more or any deposit or any amount remaining unclaimed for more than 10 years to the Fund as mentioned in paragraph 3(vii) of the Scheme, banks shall transfer to the Fund the amounts becoming due in each calendar month (i.e. proceeds of the inoperative accounts and balances remaining unclaimed for ten years or more) as specified in  the Scheme and the interest accrued thereon on the last working day of the subsequent month.

 The Fund shall be utilised for promotion of depositors’ interest and for such other purposes which may be necessary for the promotion of depositors’ interests as specified by the Reserve Bank from time to time.

The depositor would, however, be entitled to claim from the bank his deposit or operate his account after the expiry of ten years, even after the unclaimed deposit funds have been transferred to the Fund. The bank would be liable to pay the deposit amount to the depositor and claim refund of such amount from the Fund.

Scope of activities

The scope of activities for which financial assistance would be provided by the Depositor Education and Awareness Fund are as follows:

• Conducting programmes/events for educating or spreading awareness among the excluded sections of the society, about benefits of financial literacy, information about various products available on various channels explaining the procedure/formalities, etc., for enrolment and actual opening of accounts in association with recognised Depositors’ associations/ NGOs etc.
• Holding seminars and symposia for depositors/ depositors’ associations for imparting financial literacy including safe and secure banking.
• Funding projects and research activities relating to depositors’ education, rights awareness, etc.
• Production/ Procurement of material for distribution at exhibitions, seminars, town hall events, outreach programmes conducted for depositors’ awareness.
• Running Media Campaigns on financial literacy, customer protection, etc.
• Other consumer protection/awareness related programmes.

This is only an indicative list in terms of Section 26A(4) of the BR Act, 1949 and the Reserve Bank may consider such other activities which it may deem necessary for furthering the objectives of the Fund from time to time

 Monitoring: The activity of the institutions/ organisations/ associations shall be monitored, post-registration.

The most important part, RBI in order to ensure transparency, the names of registered institutions/ organisations/ associations will be placed on the RBI website.

A flurry of activity will be seen in the prospective institutions in the next couple of months to ensure that all the paper work is as per RBI guidelines.