RBI Issues Notification on KYC Updates

The Reserve Bank of India (RBI) has issued a circular instructing banks to provide KYC (Know Your Customer) update facilities at all their branches. Additionally, banks have been asked to enable the Video Customer Identification Process (V-CIP) to ease customer verification.

To reactivate inactive accounts, the RBI has also advised banks to utilize the services of authorized Business Correspondents. The central bank has invited suggestions and feedback from stakeholders on the circular until June 6.

In January, the RBI introduced new guidelines regarding unclaimed funds and inactive accounts. As per these guidelines, if there are no banking or financial transactions for two consecutive years, and no activities such as chequebook requests, the account will be classified as “inactive.”

Review and Monitoring of Inactive Accounts

The RBI has directed banks to conduct an annual review of accounts that have remained inactive for over a year. Before officially classifying such accounts as inactive, banks must notify the account holders via letters, emails, or SMS. Furthermore, banks have been told to provide adequate time to customers to reactivate their accounts if needed.

In December 2024, the RBI urged banks to take immediate steps to reduce the number of inactive and dormant accounts. Banks are now required to submit a quarterly report on the status of such accounts. Notably, in some branches, the amount held in inactive or unclaimed accounts exceeds the total active deposits.