Deposit Education and Awareness Fund (DEAF

Why in news ? This news regarding Digital Fraud Compensation is trending because of a landmark proposal by the Reserve Bank of India (RBI) to protect small-value transaction victims.

Key Highlights of the RBI Proposal:

• Compensation Limit: The RBI has proposed a compensation of up to Rs 25,000 per case for losses arising from small-value fraudulent transactions.
• “No Questions Asked” on OTP: In a major shift in policy, customers will be eligible for payouts even if they have shared a One-Time Password (OTP) with the fraudster.
• Targeting Small Frauds: This move is significant as nearly 65% of digital frauds involve amounts less than ₹50,000.
• “Once in a Lifetime” Benefit: To prevent misuse of the scheme, a customer can avail of this specific compensation benefit only once in their lifetime.
• Payout Ratio: The RBI plans to compensate 70% of the loss amount directly. The remaining 30% balance will be shared between the customer and the bank.
• Funding Source: The money for these payouts will come from the surplus income accrued on the Deposit Education and Awareness Fund (DEAF), which includes unclaimed deposits held by banks.

Broader Regulatory Measures:

The RBI Governor also announced three separate draft guidelines for public consultation:

1. Mis-selling Prevention: Addressing the unethical sale of financial products by institutions.
2. Loan Recovery Ethics: Regulating the conduct of recovery agents to prevent harassment of borrowers.
3. Limited Liability: Defining the extent of customer liability in cases of unauthorized electronic banking transactions.

About  DEAF:

The Deposit Education and Awareness Fund (DEAF) is a specialized fund managed by the Reserve Bank of India (RBI). It was established in 2014 under Section 26A of the Banking Regulation Act, 1949.

Purpose of DEAF:

• Safeguarding Unclaimed Money: To ensure that funds lying idle in inoperative bank accounts are not misused and are kept in a secure central pool.
• Education and Awareness: The interest earned from this fund is used to finance projects that promote financial literacy, depositor education, and consumer protection (e.g., campaigns against digital fraud).

Where does the money come from?

Money is transferred to DEAF from accounts that have been inactive for 10 years or more. These are called “Unclaimed Deposits.”

• Types of Accounts: Savings accounts, current accounts, fixed deposits (FDs), recurring deposits (RDs), and even cash credit accounts.
• Transfer Timeline: Banks must transfer these balances (along with accrued interest) to the RBI at the end of every month after the 10-year period of inactivity is complete.

Can you get your money back?

Yes. Transferring money to DEAF does not mean the customer loses ownership.

• Claim Process: A depositor or their legal heir can approach the original bank at any time to claim the money.
• Bank’s Role: The bank verifies the KYC and pays the customer. The bank then seeks a refund from the RBI’s DEAF pool.
• Interest: The RBI pays a specific rate of interest on these unclaimed deposits (currently around 3% per annum).