RBI asks banks to urgently reduce frozen accounts, mandates quarterly reports

The Reserve Bank of India (RBI) on Monday directed all commercial banks to urgently reduce the number of inoperative and frozen accounts and report progress on a quarterly basis.

The RBI said its analysis revealed that a substantial number of accounts across banks remain inactive for extended periods. This inactivity is often linked to a lack of customer-initiated transactions or delays in the periodic KYC updating process.

The central bank observed that customers frequently encounter problems when trying to reactivate such accounts, with issues like mismatches in personal details, such as names, further complicating matters.

The RBI instructed banks to streamline and simplify the activation process. Key measures include allowing customers to update their KYC details seamlessly through digital channels such as mobile and internet banking, as well as through non-home branches and video-based customer identification processes.

“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, including by enabling seamless updation of KYC through mobile/internet banking, non-home branches, Video Customer Identification Process, etc,” the RBI said in a circular to the heads of all commercial banks, except Regional Rural banks.

The central bank also stressed the need to segregate accounts tied to government schemes, such as Direct Benefit Transfers (DBTs) and Electronic Benefit Transfers (EBTs), noting instances where such accounts were frozen due to pending updation of KYC.

“Since these accounts mostly pertain to the people from the underprivileged sections of the 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/ frozen accounts,” it added.

The RBI has mandated that banks submit quarterly progress reports through the DAKSH portal, starting with the quarter ending December 31, 2024.