Banks must offer KYC update services at all branches and through video verification, while also enabling Business Correspondents to assist in the process.
The Reserve Bank of India (RBI) has released a draft circular proposing that banks offer Know Your Customer (KYC) update facilities to reactivate dormant accounts.
It said that the facilities should be offered to all branches including non-home branches. Additionally, banks must offer this service through the Video Customer Identification Process (V-CIP), if requested by customers and if the facility is available within the bank.
The RBI further proposed that authorised Business Correspondents (BCs) be empowered to assist with KYC updates and account reactivation, as per the Master Direction on KYC issued in 2016.
The latest draft amends the RBI’s January 2024 guidelines, which mandated banks to transfer funds lying idle for 10 years or more into the Depositor Education and Awareness (DEA) Fund managed by the RBI.
The draft follows a series of steps taken by the RBI to address the growing volume of dormant accounts. In December 2024, the central bank urged financial institutions to urgently reduce the number of inoperative or frozen accounts and report progress on a quarterly basis.
The RBI’s Department of Supervision had found that many banks held a disproportionately high number of dormant accounts relative to their overall deposit base.
Earlier in January, the RBI also revised the definition of inoperative accounts. Any deposit account with no customer-initiated activity, financial or non-financial, over a two-year period is now classified as inoperative. This includes lack of KYC updates, balance enquiries, cheque book requests, or transactions.
The draft circular is open for feedback until 6 June.