Finance Minister Advocates Unified KYC and Reduction of Unclaimed Assets
Nirmala Sitharaman Advocates for Unified KYC Standards and Swift Refunds of Unclaimed Assets
During the latest Financial Stability and Development Council (FSDC) meeting in Mumbai, Finance Minister Nirmala Sitharaman emphasized the importance of establishing common ‘know your customer’ (KYC) norms, accelerating the processing of unclaimed assets totaling Rs 97,545 crore, and enhancing financial inclusion. The 29th meeting, which she chaired, highlighted key themes such as cyber resilience, improved inter-regulatory collaboration, and a streamlined financial experience for citizens.
Key Highlights from the Meeting
The assembly saw notable participation from influential figures including Reserve Bank of India (RBI) Governor Sanjay Malhotra, Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey, Chief Economic Adviser Anantha Nageswaran, and Finance Secretary Ajay Sheth. Additionally, Parmod Kumar Arora, actuary member of the Insurance Regulatory and Development Authority of India (IRDAI), represented that body.
Recent data from the RBI’s annual report revealed a concerning rise of 57% in unclaimed deposits over the last two years, amounting to Rs 97,545 crore as of March 31. The Depositor Education and Awareness Fund (DEA) recorded a total of Rs 78,213 crore at the end of March 2024, up from Rs 62,225 crore in March 2023. Financial institutions, including cooperative banks, are required to transfer unclaimed deposits from accounts dormant for a decade or more to the RBI’s DEA Fund.
Proposed Strategies for Liquidating Unclaimed Amounts
In light of this issue, the finance minister proposed accelerating the reclamation process by organizing specialized district-level camps, which would be conducted in conjunction with the RBI, SEBI, the Ministry of Corporate Affairs, the Pension Fund Regulatory and Development Authority (PFRDA), and IRDAI, as well as banks and insurance companies. These unclaimed holdings encompass deposits in banks, unclaimed dividends and shares overseen by the Investor Education and Protection Fund Authority (IEPFA), and unclaimed pension and insurance funds governed by IRDAI and PFRDA.
Streamlining KYC Processes and Enhancing Financial Stability
A significant agenda item at the meeting was the need to ensure a user-friendly experience concerning KYC processes across the financial landscape. The council, made up of representatives from various financial regulatory agencies, underscored the necessity of maintaining macro-financial stability and bolstering the resilience of the Indian financial system in light of shifting domestic and global economic dynamics.
Furthermore, the FSDC meeting focused on the existing macro-financial situation, emphasizing the importance of vigilance and proactive measures to address any potential threats to financial stability. The council reviewed strategies for effective implementation of past resolutions and recent Budget announcements pertinent to the financial sector, including bolstering cyber resilience frameworks that consider existing cybersecurity regulations and the recommendations from the Financial Sector Assessment Programme (FSAP) for 2024-25.
Future Directions and Enhancements in Financial Services
Additionally, the meeting pointed out the necessity to improve regulatory responsiveness, elevate investment ratios, and initiate reforms within factoring services. The enhancement of account aggregator networks also emerged as a crucial topic for discussion. The council stressed the importance of fostering inter-regulatory cooperation for the comprehensive development of the financial sector and reviewed the initiatives undertaken by the FSDC sub-committee led by the RBI governor.
