A recent social media post has drawn significant attention to the difficulties faced by vulnerable customers trying to access their funds due to mandatory re-KYC formalities. Saurabh Jain shared the plight of his critically ill uncle, whose life savings, held in fixed deposits at a public sector bank, were allegedly frozen.
Family's Struggle with Re-KYC Compliance
According to Jain, his uncle, who is currently on a ventilator, was unable to complete the required in-person re-KYC (Know Your Customer) process. Despite the family submitting a doctor’s certificate and explaining his bedridden condition, the bank reportedly insisted on the customer visiting the branch personally to reactivate the accounts. This led to all his accounts being sealed, making his fixed deposits inaccessible.
The family had approached the bank earlier when the man was bedridden, seeking a humane approach to the situation. Their requests, however, were initially met with a rigid stance, with the bank stating that without a personal visit, the accounts would remain frozen.
Public Outcry and Bank's Response
Jain’s post, which described the KYC process as “draconian,” quickly went viral, tagging Prime Minister Narendra Modi and the Reserve Bank of India (RBI) for intervention. The widespread public reaction prompted a response from Union Bank of India, which subsequently reached out to the user and committed to finding a resolution to the issue.
Understanding Re-KYC Account Freezes
Banks are mandated to conduct periodic re-KYC for all customers to ensure compliance and prevent fraud. If a customer fails to complete these formalities after receiving multiple notices, their account can be partially frozen, allowing deposits but blocking withdrawals. If compliance remains outstanding for an extended period (e.g., three months after a partial freeze), the account may become completely inoperative, leading to suspension of services like internet banking, ATM cards, and chequebooks. Interest payments and pension credits can also be delayed or stopped.
RBI Guidelines for Senior Citizens and Incapacitated Individuals
The Reserve Bank of India has provided several provisions to ease the re-KYC process for senior citizens and those who are incapacitated:
- Self-declaration: If there are no changes in KYC information, senior citizens can submit a self-declaration via email, registered post, or the bank's online channels, eliminating the need for a branch visit.
- Video KYC: Many banks offer video-based re-KYC, allowing digital verification through a live interaction with a bank official.
- Non-home Branch Visits: KYC formalities can be completed at any branch of the same bank, not just the designated home branch.
- Doorstep Banking: Some banks provide doorstep services for senior citizens to facilitate document submission for re-KYC.
- Authorising a Representative: In cases of severe illness or incapacity, an authorized person can be designated to withdraw funds on the customer's behalf, often requiring witness identification.
What Account Holders Should Do
To avoid account freezing due to re-KYC issues, customers should:
- Monitor Notices: Banks typically send at least three warnings before taking action; do not ignore these.
- Contact the Bank: Reach out to the bank’s official helpline to inquire about options like net banking or video KYC for completing the process.
- Submit Self-Declaration: If details are unchanged, email a self-declaration to the bank’s designated address.
- Utilize Business Correspondents: In rural areas, bank agents can assist with the KYC process at the customer’s residence.
This incident underscores the importance of awareness regarding re-KYC requirements and the available alternatives for vulnerable populations to ensure continued access to their essential financial services.