Govt asks banks to close inactive accounts opened under PM Jan-Dhan Yojana

The concern arises from the increasing misuse of some Jan Dhan accounts by fraudsters as "mule accounts" to carry out cyber fraud

State-owned banks have been advised by the government to close inoperative accounts opened under the PM Jan-Dhan Yojana, amid rising instances of them being used as mule accounts, which are conduits to route or launder money obtained through fraud, according to people aware of the development.

 

“If they (the accounts) are not being used, the guidance is not to keep them open because they could be misused,” said a source familiar with the development. 

That said, banks are following due process to reactivate inoperative accounts by initiating re-KYC procedures.

However, if the beneficiaries are unwilling to keep the accounts active, such accounts are being closed. 

A bank account is classified as “inoperative” if there are no “customer-induced transactions” continuously for 24 months. According to a senior banker at a state-owned bank, inoperative Jan Dhan accounts are mostly from rural parts of the country.

“All the banks are addressing the matter and trying to get the re-KYC done to make them operative,” he said. 

In recent years, cases of fraud have risen significantly, prompting the Reserve Bank of India (RBI) to launch the “Mule Hunter” initiative to trace and track these accounts. 

This is a model based on artificial intelligence and machine learning and has been designed to help banks identify and trace mule accounts. 

“We have observed that some of these Jan Dhan accounts are being used as mule accounts for cyber frauds. At Bank of India alone, over the past six months ₹147 crore of depositors’ money has been affected,” said Rajneesh Karnatak, managing director and chief executive officer, at an event on Friday in Mumbai. 

According to the RBI data, there were 13,516 frauds in digital payments in FY25, the highest in banking. Such frauds comprised 56.5 per cent of the total and involved ₹520 crore. Further the central bank has observed that frauds mostly occurred in digital payments (card/internet) in terms of volumes and primarily in the loan portfolio (advances) in terms of value.

Card/internet fraud comprised the largest number of cases reported by private-sector banks. 

“Multiple accounts were opened mostly in 2014-15 in the wrong notion that more accounts would bring more benefit as part of the direct benefit transfer (DBT) scheme. Now DBT has stabilised, giving a clear assessment about which accounts receive benefits. The other accounts remain inoperative, exposing them to risks of misuse like cyber fraud or money laundering,” said a senior State Bank of India (SBI) executive. 

“After 10 years of operations, the accounts, under Prime Minister Jan Dhan Yojana (PMJDY), are up for KYC (know your customer). This task is huge, given the number of accounts. The inoperative accounts will have to be ring-faced and ideally closed,” he said, adding that the closing of such accounts is a sensitive matter because they are under the PMJDY. 

Any direct decision by banks to close accounts can lead to complications, especially if the impact on beneficiaries is overlooked. The way forward is for the Prime Minister’s Office (PMO) and the Ministry of Finance to take the lead in deciding on the closure of inoperative Jan Dhan accounts. One and a half years is needed to complete the fresh KYC process for Jan-Dhan accounts. The RBI should take this concern into consideration, he further added.

 

Under the PMJDY, a national mission for financial inclusion to ensure access to financial services, a basic savings bank deposit (BSBD) account was opened in any bank branch or business correspondent (Bank Mitra) outlet by people not having any other account. 

As of June 25, 557 million accounts have been opened under the PMJDY scheme. These accounts collectively have ₹2.60 trillion in deposits. 

Of the 557 million accounts, 310.6 million accounts belong to females. Over 370 million accounts are in rural and semi-urban branches while 185.3 million are in metros. 

Business Standard had reported in January more than one in every five accounts under the PMJDY had turned inoperative by December last year. Inoperative Jan Dhan accounts rose from 19 per cent of the total in March 2024 to 21 per cent in December that year.