FSDC Discusses Special Drive for Unclaimed Deposits & Reducing Compliance Burden

Finance Minister on recently chaired a Financial Stability and Development Council (FSDC) meeting regarding the ‘State of Economy’. This is the first such meeting since the announcement of the Union Budget 2023-24. The apex body meeting was also attended by RBI governor Shaktikant Das as well as the Economic Affairs Secretary Ajay Seth. 

FSDC discussed matters such as financial stability during the meeting. It emphasised that the worldwide economic situation presents serious problems. Ajay Seth said, “Being on our toes and maintaining financial stability is a shared responsibility, and all the members will be working towards that.” The council also reviewed early warning indications for the economy.

Two of the most pressing issues that the commission discussed were the settlement of unclaimed deposits in banks and other financial institutions as well as the easing of compliance burden. 

Settlement of Unclaimed Deposits 

FSDC suggested that authorities undertake a special drive to address unclaimed deposits in banks and other financial organisations. This effort was discussed by Nirmala Sitharaman during the 27th meeting of the Cabinet on Monday. Ajay Seth, Economic Affairs Secretary, told reporters that officials were discussing methods to simplify handling unclaimed deposits and disputes in the banking system across all sectors. According to a PTI article, this includes bank deposits, stock and dividends, mutual funds, and insurance.

According to February 2023 data, public sector banks remitted around 35,000 crore in unclaimed deposits to the RBI in respect of accounts that had not been functioning for ten years or more. The funds in question are from 10.24 crore accounts that were also transferred to the RBI by the end of February 2023. 

The meeting was attended by RBI governor Shaktikant Das, who stated earlier in April that a centrally managed system where depositors and recipients may obtain data of unclaimed deposits across multiple banks is in the works and will be available in the next three to four months. 

State Bank of India (SBI) leads the list of unclaimed deposits with 8,086 crore in unclaimed deposits, then comes Punjab National Bank with 5,340 crore in unclaimed deposits. This is closely followed by Canara Bank with 4,558 crore and Bank of Baroda with 3,904 crore in unclaimed deposits. Moreover, a portal run by the Investor Education and Protection Fund (IEPF) Authority suggests that the unclaimed money in dividends and shares can be as high as ₹50,000 crore.

The RBI has announced the creation of a new centralised web platform for searching for unclaimed deposits over ten years old. Currently, Bank clients have to navigate through the websites of various institutions to claim their deposits. This new web platform will allow bank customers to locate unclaimed deposits in a single location. Other than this the Finance Minister has asked banks and financial institutions to conduct a special drive to settle the unclaimed deposits.

Easing Compliance Burden

Reduced regulatory compliance burdens on firms and individuals have the ability to emerge as the next economic development catalyst. The decreased regulatory burden will especially benefit small enterprises, which make up more than 95% of Indian businesses.

Vital regulatory compliances relate to four key areas: taxation, which includes GST and corporate tax, factory, which comprises quality, safety and pollution norms, and employee welfare which has labour laws and firm structure, which has audit and reporting requirements under it. Compliance requirements rise as a company expands into fresh sectors such as overseas trading. Firms must keep records, submit returns, get registrations and permits, and be prepared for audits. Any lapse may result in a charge of interest, a fine, or legal action.

Currently, India lacks a master document from which to deduce the essential regulations, agencies to contact, service fees, estimated duration of service, and an overall expectation of the trade to make commerce fair. Currently, every regulatory agency discloses its regulatory criteria on its own platforms. The entrepreneur is at the mercy of the intermediaries. As a result, experts believe that creating a master document will help firms run more effectively while also contributing to the central government's ease of doing business programmes. 

A single-window system is another proposal for lowering the compliance load. Citizens must currently visit various government agencies to get permission and approvals. A business owner who wants to open a warehouse must get 12-16 permissions from eight separate agencies of government. A single window system can make this process much less onerous, which could encourage more people to start their own businesses.

In a few cases, experts advise delegating rule-making. Privatise operations such as the issue of driver's licences, for example. Adopt worldwide environmental management system rules such as ISO 14000 standards.

Citizens and corporations dislike spending time and money filling out and completing documents to pay taxes or obtain services. Adoption of the aforementioned practices can increase productivity, stimulate growth, and make India a better location to conduct business.