The Reserve Bank of India (RBI) has directed banks to take immediate action to reduce the number of inoperative or frozen accounts and report their status quarterly. Highlighting concerns over the increasing funds in such accounts, the RBI stated that supervisory inspections have uncovered several issues leading to accounts becoming inoperative or frozen. The Department of Supervision, RBI, recently conducted an analysis that revealed a significant proportion of inoperative accounts and unclaimed deposits in various banks, both in terms of their total deposits and absolute numbers. The central bank emphasised the urgent need for corrective measures to address this issue.
"The banks are advised to take necessary steps urgently to bring down the number of inoperative/frozen accounts and make the process of activation of such accounts smoother and hassle-free," a notification to chiefs of all the banks said. Banks may look at enabling seamless updation of KYC (know your customer) through mobile/internet banking, non-home branches and Video Customer Identification Process, it suggested. The notification said it has observed instances where the accounts of underprivileged beneficiaries of state-run cash transfer schemes have been frozen due to other factors such as pending updation/ periodic updation of KYC, even though such beneficiary accounts are required to be segregated to facilitate uninterrupted credit of scheme funds.
Banks urged to prioritise customer convenience
Asking banks to take an "empathetic view" in such cases, the notification said banks may also organise special campaigns for facilitating the activation of inoperative/frozen accounts. Apart from this, the banks may also facilitate Aadhaar updation for customers through branches providing Aadhaar related services, it said, adding that instructions have been issued to state-level banking committees to proactively monitor the situation in their respective jurisdictions with a view to minimise customer inconvenience.
The RBI analysis revealed that accounts were getting inoperative with deposit accounts being unclaimed due to variety of reasons including inactivity for a long time or pending updation/periodic updation of KYC. "Reportedly, there were instances of customers facing inconvenience when they approached the bank branches for activation of inoperative accounts including inadvertent errors in customer details such as mismatch in name, etc," it said.
RBI sets guidelines for addressing frozen accounts
It was also observed that a few banks have a large pendency of accounts that are due for updation/ periodic updation of KYC, resulting in such accounts getting frozen for further transactions as per bank's internal policies, the central bank said. The notification said progress in the reduction of inoperative/frozen accounts and the special efforts made by the banks in this regard may be monitored by the Customer Service Committee (CSC) of a bank's Board and asked banks to report the same quarterly to the respective Senior Supervisory Manager (SSM) through DAKSH portal, starting from the quarter ending December 31, 2024. Banks are required to place the notification on inoperative accounts before the CSC of the Board at their next meeting along with a monitorable action plan for compliance, it said.
(With PTI inputs)
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