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The Reserve Bank of India (RBI) has issued a directive that addresses the presentation of unclaimed liabilities transferred to the Depositor Education and Awareness (DEA) Fund. These new guidelines, outlined in RBI/2023-24/71, are aimed at enhancing the transparency and consistency of financial statements of commercial and cooperative banks. In this article, we’ll explore the key points of this directive and its implications.

1. Background on DEA Fund: The Depositor Education and Awareness (DEA) Fund is established under the DEA Fund Scheme, 2014. Its purpose is to promote awareness and educate depositors about the banking industry, thus ensuring the safety of their investments. To fund these initiatives, certain unclaimed liabilities are transferred to the DEA Fund.

2. Presentation of Unclaimed Liabilities: The recent RBI directive focuses on the presentation of these unclaimed liabilities in the financial statements of banks. Specifically, the “Notes and Instructions for compilation” require commercial banks to present these unclaimed liabilities under ‘Schedule 12 – Contingent Liabilities – Other items for which the bank is contingently liable.’

3. Co-operative Banks Inclusion: To maintain consistency in financial statement presentation, the RBI advises all co-operative banks to present unclaimed liabilities transferred to the DEA Fund under “Contingent Liabilities – Others.”

4. Disclosure Requirement: In addition to the presentation aspect, banks are mandated to include specific disclosures in the notes to the accounts of their financial statements. These disclosures should clarify that the balances of the amount transferred to the DEA Fund fall under ‘Schedule 12 – Contingent Liabilities – Other items for which the bank is contingently liable’ or ‘Contingent Liabilities – Others,’ as applicable.

Applicability:

5. Effective Date: These instructions are applicable to all commercial and cooperative banks for the preparation of financial statements for the financial year ending on March 31, 2024, and beyond. It’s crucial for banks to ensure that their financial statements adhere to these new guidelines.

6. Updated Directions: The issuance of this directive has led to updates in the ‘Reserve Bank of India (Financial Statements – Presentation and Disclosures) Directions, 2021.’ Banks should review and implement these updates to maintain compliance with RBI regulations.

7. Conclusion: The Reserve Bank of India’s directive regarding the presentation of unclaimed liabilities transferred to the Depositor Education and Awareness (DEA) Fund is a significant step towards ensuring consistency and transparency in the financial statements of commercial and cooperative banks. By specifying the appropriate categories and requiring disclosures, the RBI aims to provide clear information to stakeholders and depositors. These guidelines are essential to support the DEA Fund’s objectives of educating and safeguarding depositors in the banking industry. All affected banks should promptly adhere to these directives and reflect these changes in their financial statements for the fiscal year ending March 31, 2024, and beyond.

*****

Reserve Bank of India

RBI/2023-24/71
DOR.ACC.47/21.04.018/2023-24

October 25, 2023

Madam / Sir,

Reserve Bank of India (Financial Statements – Presentation and Disclosures) Directions, 2021: Presentation of unclaimed liabilities transferred to Depositor Education and Awareness (DEA) Fund

The ‘Notes and Instructions for compilation’ given in Annex II to the Reserve Bank of India (Financial Statements – Presentation and Disclosures) Directions, 2021 (Master Direction) require commercial banks to present all unclaimed liabilities, where the amount due has been transferred to the Depositor Education and Awareness (DEA) Fund established under the DEA Fund Scheme, 2014, under ‘Schedule 12- Contingent Liabilities – Other items for which the bank is contingently liable’.

2. To ensure consistency in presentation of financial statements, it is advised that all co-operative banks shall present all unclaimed liabilities (where the amount due has been transferred to DEA Fund) under “Contingent Liabilities – Others”.

3. Further, all banks shall specify in the disclosures1 in the notes to accounts to the financial statements that balances of the amount transferred to DEA Fund are included under ‘Schedule 12 – Contingent Liabilities – Other items for which the bank is contingently liable’ or ‘Contingent Liabilities – Others,’ as the case may be.

Applicability

4. These instructions are applicable to all commercial and cooperative banks for preparation of financial statements for the financial year ending March 31, 2024 and onwards.

5. The Reserve Bank of India (Financial Statements – Presentation and Disclosures) Directions, 2021 stands updated to reflect these changes.

Yours faithfully,

(Usha Janakiraman)
Chief General Manager

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