SBI wants RBI to consider 'balance checking' for reactivating dormant bank accounts

Amid RBI’s push to urgently reduce the number of inoperative and frozen accounts, the State Bank of India (SBI) has requested the Reserve Bank to consider non-financial transactions like balance checking as well for tagging an account as operative.

Speaking on the sidelines of a bank event late on Tuesday evening, SBI chairman C S Setty said many accounts, especially those used primarily for receiving government welfare benefits under schemes like Direct Benefit Transfers (DBTs), often see minimal transactions.

After the money gets credited into the account under the DBT, there are at best two to three debit transactions before it becomes dormant and earns the tag of being inoperative, he said.

The SBI chairman opined that a non-financial transaction should be able to activate the account, adding, "We have taken it up with the Reserve Bank of India (RBI)."

Banks have been asked to make KYC updates more accessible through digital channels, non-home branches, and video-based 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.

Setty said the current set of rules focuses on financial transactions at a given point in time which results in a lot of accounts getting tagged as "inoperative".

When a customer actually does a non-financial transaction, it is a signal of he or she being "aware" of the bank account and hence there is a case for tagging it as an active account, he said.