The Reserve Bank of India has instructed banks not to freeze accounts that receive Direct Benefit Transfer (DBT) funds from government schemes, even if the accounts lack proper Know Your Customer (KYC) documentation.
DBT facilitates the transfer of money from subsidies, pensions, and various special schemes directly from the central government to beneficiaries across the country. The Reserve Bank's Deputy Governor, Swaminathan J., emphasized that freezing accounts due to inadequate KYC creates obstacles for these important schemes. He stated that these accounts should remain active to ensure beneficiaries receive their funds.
Swaminathan highlighted that many customers are currently facing difficulties in accessing their money because their accounts have been frozen for non-compliance with the Reserve Bank's instructions. This situation has caused significant hardship for account holders.
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He pointed out that banks bear responsibility for the delays in completing KYC processes. Swaminathan noted that there are several reasons for the backlog, including a lack of proactive measures by banks to assist customers in obtaining the necessary documents. Additionally, he indicated that many banks are experiencing staffing shortages, which contributes to delays in updating KYC information. As a result, customer documents are not being updated in the banks' systems in a timely manner.