Expressing concern over the rising sums of money lying in inoperative or frozen bank accounts, the Reserve Bank of India (RBI) says its supervisory inspections have revealed a slew of problems due to which accounts are becoming inoperative or frozen. The central bank has asked banks to 'urgently' reduce the number of inoperative or frozen accounts by taking necessary steps and also report their numbers quarterly. As
reported by Moneylife last month, banks are illegally asking for re-KYCs and, in the process, are collecting additional data from customers.
In
a notification, RBI says, "The banks are, therefore, advised to take necessary steps urgently to bring down the number of inoperative or frozen accounts and make the process of activation of such accounts smoother and hassle-free, including by enabling seamless updation of know-your-customer (KYC) through mobile or internet banking, non-home branches and video customer identification process(V-CIP)."
While the accounts of beneficiaries of various Central and state government schemes like direct benefit transfer (DBT) or electronic benefit transfer (EBT) are required to be segregated to facilitate uninterrupted credit of such DBT and EBT amounts in their accounts, RBI says instances have been observed where the accounts of such beneficiaries have been frozen due to other factors such as pending updation or periodic updation of KYC.
"Since these accounts mostly pertain to people from the underprivileged sections of society, the banks may facilitate the process of activation of accounts by taking an empathetic view in such cases. The banks may also organise special campaigns for facilitating activation of inoperative or frozen accounts. Besides, the banks may also facilitate Aadhaar updation for customers through the branches providing Aadhaar related services. Instructions have been issued separately to state-level bankers' committees (SLBCs) to proactively monitor the situation in their respective jurisdictions with a view to minimise customer inconvenience," RBI says.
Recently, RBI's department of supervision conducted an analysis which revealed that the number of inoperative accounts or unclaimed deposits in several banks was on the higher side vis-a-vis their total deposits as well as in absolute terms.
The reasons were either inactivity for a long time, pending updation, or periodic updation of KYC in such accounts. Reportedly, RBI says there were instances of customers facing inconvenience when they approached the bank branches to activate inoperative accounts, including inadvertent errors in customer details such as name mismatches.
It was also observed that a few banks have a large pendency of accounts that are due for updation or periodic updation of KYC, resulting in such accounts getting frozen for further transactions as per the bank's internal policies.
"The progress in the reduction of inoperative or frozen accounts and the special efforts made by the banks in this regard may be monitored by the customer service committee (CSC) of the Board. In addition, the banks are also advised to report the same on a quarterly basis to the respective senior supervisory manager (SSM) through the DAKSH portal, starting from the quarter ending 31 December 202,” the central bank says.
A circular issued by RBI on 1 January 2024 requires banks, among other things, to undertake an annual review of accounts or deposits where there are no customer-induced transactions for more than a year; segregation in their core banking solution (CBS) of accounts opened for credit of scholarship amount and/ or DBT and EBT under government schemes to facilitate credit of DBTs even if such accounts have become inoperative and take steps to trace the customers of these accounts or deposits. The circular also contains operational guidelines for activation of such accounts and deposits, customer awareness measures such as public awareness and financial literacy campaigns to be undertaken by banks and requires information on the process for activation of such accounts or deposits to be displayed on the banks' websites and branches.
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