Banks must offer KYC update to reactivate inactive accounts: RBI draft

RBI's draft proposes KYC updates at all bank branches and via video to ease activation of inoperative or unclaimed accounts and reduce dormant deposit numbers

The Reserve Bank of India (RBI), in a draft circular issued on Friday, proposed that banks must offer the facility to update Know Your Customer (KYC) details for activating inoperative accounts or unclaimed deposits at all branches, including non-home branches.

 

Additionally, banks should provide this service through the Video Customer Identification Process (V-CIP), if requested by the account holder and subject to the availability of the V-CIP facility at the bank.

 

The RBI also stated that authorised business correspondents of the bank may be utilised for activating inoperative accounts.

 

The central bank has invited comments from stakeholders on the draft circular by 6 June.

 

In January, the RBI introduced new guidelines on unclaimed deposits and inoperative accounts, stating that accounts will be categorised as 'inoperative' if there have been no customer-initiated transactions within a period of two years. This includes any form of monetary transaction, KYC updates, or non-financial activities such as balance enquiries or requests for cheque books.

 

Additionally, the RBI said banks are required to conduct annual reviews of accounts that have been without customer-initiated transactions for more than a year. Customers must be notified via letters, emails or SMS if their accounts are at risk of becoming inactive. They will also be given an extended period to reactivate their accounts.

 

In December 2024, the RBI urged banks to “urgently” reduce the number of inoperative or frozen accounts by taking necessary steps and reporting their numbers on a quarterly basis. In an analysis conducted by the Department of Supervision, the RBI discovered that the number of inoperative accounts and unclaimed deposits in several banks was high — both in absolute terms and relative to their total deposits.

 

As per the RBI mandate, the credit balance in any deposit account maintained with banks, which has not been operated upon for ten years or more, or any amount remaining unclaimed for ten years or more, must be transferred by banks to the Depositor Education and Awareness (DEA) Fund maintained by the RBI.