Mass freezing of bank accounts: How KYC crisis is depriving the poor of their own money

Scores of people from vulnerable, poor sections in Jharkhand are unable to withdraw money because their accounts have been frozen until they complete ‘KYC’
Mass freezing of bank accounts: How KYC crisis is depriving the poor of their own money
Sora Oraon from Dhanamunji, whose family has three bank accounts frozen, was only given a paper token with an appointment date two months later when she applied for KYC. NREGA Sahayta Kendra
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The three children of Jharkhand's Ashok Parhaiya were unable to withdraw their scholarships in the last few months. The reason: Their bank accounts were frozen as their 'Know Your Customer' (KYC) formality was due.

Parhaiya, belonging to a Particularly Vulnerable Tribal Group from Uchwabal in Latehar district, sought help from a customer service centre operator and paid Rs 150 per child to get the KYC done but nothing changed. 

He had given copies of the children’s Aadhaar and passbook to the operator, but whenever he enquired, the operator asked him to wait or check with the bank. In the meantime, Ashok has given up. 

This is not just a one off case. 

Scores of people from vulnerable and poor sections in Jharkhand — from children who receive scholarships, women entitled to money under different government schemes, to elderly pensioners — have become victims of this mass freezing of bank accounts, where they have been unable to withdraw money because the accounts have been frozen until they complete ‘KYC’ formalities. 

This was found during a recent survey conducted in Latehar and Lohardaga districts by local NREGA Sahayata Kendras.

Ashok Parhaiya from Uchwabal village in Latehar district paid agents & followed up multiple times in vain to get his KYC done.
Ashok Parhaiya from Uchwabal village in Latehar district paid agents & followed up multiple times in vain to get his KYC done. NREGA Sahayta Kendra

KYC refers to identity verification formalities in the banking system. “These formalities are not easy to complete for poor people. They require biometric verification of Aadhaar number at a Pragya Kendra, taking the verification certificate to the bank, filling a form there, and submitting both with the requisite documents. After that, the customer is at the mercy of the bank for timely reactivation of the account. This can take months,” said the report based on the survey by socio-economic activist Jean Drèze and his team members. 

The teams did a door-to-door survey in three small villages (Dumbi, Kutmu and Uchvabal) of Manika block in Latehar district and four villages (Booti, Dhanamunji, Kandra, and Palmi) of Bhandra and Senha blocks in Lohardaga district.

In these seven villages, 60 per cent of the 244 households had at least one frozen bank account. In some households, all accounts were frozen.
Take for instance Urmila Oraon, a resident of Kandra. In her seven-member family, six people have bank accounts and all six have been frozen due to KYC issues. She recently stood in a queue for two full days at the bank, but nothing came out of it, as she was simply told to go back home.

The crisis reflected the growing insistence of banks on periodic KYC. One local bank manager told the survey team that he had a backlog of 1,500 KYC applications, against a processing capacity of just 30 KYCs per day.

Sora Oraon from Dhanamunji, who has a family of five out of which three have bank accounts that are frozen, applied for KYC, and had to queue for a long time only to be given a paper token in the end, with an appointment date two months later, for December, 27 2024. 

In Kandra, Bhola Oraon and Basant Oraon’s accounts have been frozen for years because their names are misspelt ‘Bhoula Oraon’ and ‘Basnt Oraon’ in their Aadhaar cards. 

This has also affected Jharkhand’s Maiya Samman Yojana, a state government financial assistance scheme for women between 18 and 50 years, as many women have been unable to withdraw money from their accounts. 

“Poor people generally have an Aadhaar-linked account with a maximum balance of Rs 1 lakh. What is the need for such tight KYC every few years?” said the report, asking for an urgent review of the entire process.  

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