According to Mint reports, the Reserve Bank of India has established a phased approach for handling accounts with incomplete KYC requirements. Under RBI rules, banks are required to send advance notifications before KYC becomes due and additional reminders if customers fail to update their information after the due date. The framework specifically states that banks may impose 'partial freezing' on KYC non-compliant accounts in a phased manner rather than immediately freezing all account access.
As reported by Mint, KYC (Know Your Customer) is a mandatory requirement for bank customers in India that helps lenders verify identity, address and other details. The requirement applies when opening any account, for walk-in customers making transactions of ₹50,000 or more, for international money transfers, and when banks sell financial products or process credit card payments above ₹50,000. Additionally, KYC may be required if there is any doubt about the customer's details.
According to the RBI's clarification reported by Mint, an account becomes 'inoperative' when there are no customer-initiated transactions for two years. Such accounts can be activated once the customer has updated their KYC information as required. The RBI explains that customers can update their KYC information at the home/non-home branch of the bank, and banks shall activate inoperative accounts only after adhering to KYC guidelines provided in the Master Direction on KYC.
As reported by Mint, the RBI's framework provides important protections for customers facing KYC compliance issues. Customers can revive such accounts by submitting the required KYC documents, and the messages sent by banks must convey the consequences of non-compliance. The phased approach ensures that customers face restrictions on certain transactions or banking services rather than immediately losing access to all funds, providing time for compliance while maintaining account access for essential banking needs.
