Finance minister urges financial entities to ensure customers nominate heirs

Finance Minister Nirmala Sitharaman has asked banks and other financial institutions to ensure that their customers update nominees to help resolve the problem of unclaimed money in future.

"I want the banking system, the financial ecosystem, including the mutual funds, stock markets, to keep in mind that when someone deals with his (customer's) money, the organisations will have to think about the future and ensure that customers nominate their heirs, give the name and address," Sitharaman said, speaking at the Global Fintech Fest in Mumbai.

According to a report, the banking system alone has more than Rs 35,000 crore of unclaimed deposits, while the overall quantum of unclaimed money is said to be more than Rs 1 lakh crore.

The Reserve Bank of India last month launched a centralised web portal UDGAM (Unclaimed Deposits - Gateway to Access information) to help people search for and claim unclaimed deposits.

The portal, launched by the RBI Governor Shaktikanta Das, has been developed by the central bank to make it easier for the public to find unclaimed deposits across multiple banks in one place.

The finance minister said it is essential to build a responsible financial ecosystem and one laggard can cause a disruption, leading to trust deficit and a resultant crisis in the financial world.

She also noted that tax havens and round-tripping of money are threats to a responsible financial ecosystem.

"We equally should talk about the threats to a responsible financial global ecosystem and the global challenges thereof to build a responsible financial ecosystem," she said.

Listing out the threats faced by the financial system, she said there are physical border threats, such as conventional warfare, and cyber threats whose intensity, unpredictability, depth, and access have gone up very high today.

"As much as you build firewalls, there are more and more newer ways in which attacks are being made. Cryptos, which are a threat as well as an opportunity, is also an example of the urgent need for global cooperation because we are not going to be able to have a responsible financial ecosystem which we cannot regulate."

On how fintech players have helped the country, the minister said, in the last four years, the number of demat accounts has increased 2.5 times from 4.1 crore in 2019-20 to 10 crore in 2022-23.

A record number of mutual fund systematic investment plans (SIP) are being registered, which helps in generating long-term wealth. Monthly SIP inflows touched an all-time high of Rs 15,245 crore in July.

Assets under management in the mutual fund industry have increased tremendously in the last decade, growing more than four-fold from Rs 10 lakh crore in May 2014 to Rs 46.37 lakh crore in July 2023, said the finance minister.

On the increasing number of income tax return filings, she said August data signals that the formalisation of the economy is now really wide and it is accessing many different areas. Credit facilities, social security, pension, and insurance are getting covered, she said.

Though Maharashtra still continues to be the leader in income tax filing, other states are also moving up. In places such as Northeast, Chhattisgarh, and Jammu & Kashmir, the new I-T return filings have gone up to two digits, clocking a double-digit growth. This augurs very well for the financial ecosystem, she said.

She urged fintech companies to invest heavily in robust security measures, utilising advanced encryption and other measures to protect user data and financial transactions.

A secured system is what will build trust and, therefore, it is a must for the financial ecosystem to truly flourish, she said, adding that India can lead in making the financial ecosystem inclusive, resilient and sustainable, as we have the tools but we have to make it responsible, she said.