RBI drafts new rules to simplify KYC for dormant bank accounts

The Reserve Bank of India (RBI) has issued a draft amendment to simplify the reactivation of inoperative accounts and the claim process for unclaimed deposits. The new proposal allows banks to use Business Correspondents (BCs) and Video-based Customer Identification Process (V-CIP) to update Know Your Customer (KYC) details for such accounts.

Why the change?

Under current rules, any bank deposit not operated for 10 years or more is classified as inoperative and must be transferred to the Depositor Education and Awareness (DEA) Fund, maintained by the RBI.

However, customers often face hurdles in reactivating these accounts due to KYC update issues, especially in rural and semi-urban areas.

To address this, RBI has proposed an amendment to its earlier circular (dated January 1, 2024).

Key proposals under the draft amendment

KYC updation at any branch

Banks must allow customers to update their KYC at all branches, including non-home branches, for activating dormant accounts.

Use of video KYC

If requested by the customer, banks can use V-CIP to update KYC remotely. However, this will depend on whether the bank offers the V-CIP facility.

Business correspondents can help

Banks can now use authorised BCs to collect KYC documents and assist in reactivating inoperative accounts. This is expected to improve access in remote areas.

These changes align with the broader KYC Master Direction of 2016, which RBI continues to update regularly to encourage digital and inclusive banking.