Accounts wake up - Flurry of activity in Jan Dhan segment

Pinak Ghosh & TT, Calcutta, Nov. 20: Around 15 lakh dormant bank accounts have sprung to life in Bengal since Prime Minister Narendra Modi's demonetisation announcement on November 8.

"There was confusion in the early days after the announcement and there was lack of operational clarity at the branch level. Going by the estimates of dormant accounts becoming active, it seems individuals started using their dormant accounts to deposit and exchange old currency notes," a city-based bank official said.

Banking sources also say that there has been a flurry of activity in Jan Dhan bank accounts - the financial inclusion scheme that the Modi government aggressively promoted two years ago.

There are 2.43 crore Jan Dhan bank accounts in Bengal and bankers estimate that at least 7 per cent of these accounts have seen activity (deposit and withdrawal) on a daily basis.

While many of these transactions could be legitimate, the misuse of bank accounts cannot be discounted altogether.

"The Centre and the RBI have asked the banks to furnish details of daily transaction and we are providing the same," said the official.

Addressing a rally in Agra today, the Prime Minister himself detailed the possible modus operandi and cautioned citizens not to allow anyone to misuse their Jan Dhan accounts.

"These corrupt people are very cunning. They may approach you to deposit Rs 2.5 lakh in your account. They can ask you to return Rs 2 lakh after six months and offer you Rs 50,000. But please do not let these people take advantage of you," Modi said. The government had earlier said deposits above Rs 2.5 lakh would be scrutinised and information on the source of the cash would be sought.

Modi added: "The law is very tough... the corrupt would say it is not my money and the people in whose accounts the money is deposited will be answerable. Unnecessarily, the poor will have problems with the law. I do not want my brothers and sisters to have any problem."

The Centre has warned that violators would be prosecuted under the Benami Transactions Act that carries a penalty and rigorous imprisonment of up to seven years.

"It is hereby clarified that such tax evasion activities can be made subject to income tax and penalty if it is established that the amount deposited in the account was not of the account holder but of somebody else. Also the person who allows his or her account to be misused for this purpose can be prosecuted for abetment under the Income Tax Act," a statement from the finance ministry said.

Estimates sourced from banks suggest that cumulatively CASA deposits (current and savings account) have grown by around Rs 65,000 crore in Bengal since November 8.

"It has gone beyond individuals' deposits; we have seen deposits from cold storages, motor vehicle dealers, construction firms, textile units and jewellery shops too," the official said.

Commercial banks are required under RBI rules to review bank accounts that have witnessed no operations for more than 12 months. The RBI master circular on the subject defines "operations" as a credit or debit transaction but does not include credit of periodic interest on pre-existing balances or debiting of service charges. A grace period of another 12 months is available before the account is classified as inoperative.

According to bank officials, a dormant account can be activated through a credit or debit transaction from the account. Banks may ask for a written request from the accountholder along with proof of identity to activate the account. The activation time varies, depending upon the branch location and could take at least a day.

The bank official in the city said: "We have received reports that some people are using other persons' bank accounts to convert their black money into new denomination notes. They are paying a small commission to the account holders who allow their accounts to be used to launder the money. This activity is being reported in the case of Jan Dhan accounts also."

The Financial Intelligence Unit (FIU-IND) under the Union finance ministry is monitoring bank transactions, he added.