Rs 21,400 crore in 'inoperative accounts' under tax lens

Bank accounts inoperative for many years witnessed huge deposits post demonetisation

Prime Minister Narendra Modi exhorted in his independence Day speech that his government was investigating bank deposits worth Rs 1.75 lakh crore post demonetisation. While deposits in Jan Dhan accounts are already under the scanner, Income Tax investigators are also training their guns on deposits made in dormant and inoperative bank accounts in the weeks following the note ban. 

The Reserve Bank of India (RBI), in a recent memo authored by Bhupal Singh and Indrajit Roy, estimated that between September and October 2016 just about Rs 2,830 crore had been deposited in such inoperative accounts held in 52 banks. 

However, between November 8, when the government invalidated high denomination bank notes, and December 30, the deposits in such accounts ballooned to Rs 24,220 crore. In a span of just a few weeks after demonetisation, almost Rs 21,400 crore flowed in accounts that had seen barely any activity for years.

The 765 per cent spike in deposits in inoperative accounts was second only to increase in deposits in Jan Dhan accounts. Deposits in Jan Dhan accounts had risen 897 per cent while those in regular savings and current accounts were up 294 per cent between November 8 and December 30 last year. 

I-T sources say they would be running background checks on the operators of these accounts, to identify how many of them were conducting high-value transactions in hard cash outside the banking system in a bid to evade taxes. Many banks have shared information pertaining to unusual transactions after a long period of time in dormant or inoperative bank accounts with I-T investigators. The I-T department, after thorough scrutiny and background checks, will draw a list of suspicious transactions, send notices to their owners and initiate probes in those cases where such action is deemed pertinent. 

RBI guidelines state that a savings or current account should be treated as dormant or inoperative in case no transactions have been recorded in it for two years. For an account to be classified as inoperative, both debit and credit transactions, made by both the account holder and third parties, are considered. However, any interest payments by banks are not counted as transactions while determining whether an account is dormant or not. The RBI has, in the past, laid down strict guidelines for banks to deal with dormant accounts. It has stated that segregation of inoperative accounts should be done purely from the standpoint of preventing frauds. The RBI in a missive in 2008 to all scheduled commercial banks stated, “The classification of inoperative accounts is only to bring to the attention of the dealing staff, the increased risk of fraud. The transaction may be monitored at a higher level both from the point of view of preventing fraud and making a Suspicious Transactions Report (STR). However, the entire process should remain un-noticeable by the customer.”

Banks are also required to make an annual review of accounts in which no transactions have been noticed for over a year. Banks are supposed to locate the owners of such accounts. In case these customers are untraceable, the person who introduced them to bank is contacted. In certain cases, even the employers of these customers need to be contacted by banks. If the owners of these accounts are not alive, then banks are required to trace their legal heirs.