New Delhi: Mass freezing of bank accounts because of incomplete “KYC formalities” – KYC is ‘know your customer’ – has left countless people in Jharkhand without access to their own savings, a recent survey found.
New bank rules require all account holders to update their KYC details every few years, but this has also created another layer of bureaucratic hassle for people living in the hinterland, many of them without much institutional and financial literacy.
The survey was conducted by NREGA Sahayata Kendras in two Adivasi-majority districts of Jharkhand – Latehar and Lohardaga. Three villages of Manika Block in Latehar District (Dumbi, Kutmu and Uchvabal) and four villages of Bhandra and Senha Blocks in Lohardaga District (Booti, Dhanamunji, Kandra and Palmi) were surveyed by NREGA volunteers, who found that 60% of the 244 households had at least one frozen bank account, while in some all their accounts had been frozen.
They also found that the frozen bank accounts have prevented many welfare beneficiaries from accessing even the meagre pensions for the elderly, student scholarships, and Rs 1,000 per month that the women receive under Jharkhand’s Maiya Samman Yojana.
In Uchwabal, Latehar, Ashok Pahariya’s three children could not withdraw their scholarships. He paid a CSC agent Rs 150 per child to get his KYC updated and submitted his children’s Aadhaar and passbook to him. However, nothing has changed even after following the procedure. Similarly, Sangeeta Devi of Kutmu, Latehar, allegedly paid Rs 1,000 as bribe to fix a mistake in her own Aadhaar card to the CSC operator but nothing moved even then.
The “tyranny of KYC”– examples from Jharkhand.
Case 1: Ashok Parhaiya (PVTG). His three children get scholarships, but their bank accounts are frozen because “KYC laga hua hai”. He is running around and spending money to solve the problem, without success. pic.twitter.com/8LQp60tLXg
— Road Scholarz (@roadscholarz) October 14, 2024
Case 2: Somwati Devi explains how she had to run around for two weeks to get her KYC done after her bank account was frozen. She kept going to the bank and being sent away. pic.twitter.com/pv6tPbizuG
— Road Scholarz (@roadscholarz) October 14, 2024
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At Kandra, Lohardaga, Bhola Ram’s KYC issues could take months to be solved. His name is correctly spelt in the bank account but misspelled as ‘Bhoula Ram” in his Aadhaar card. The bank manager told him that unless the name matches entirely, he cannot do anything to unfreeze his account. Bhola Ram’s journey now will begin at getting his name corrected in his Aadhaar card.
2/8 Case 2: Sora Oraon. Three accounts are frozen in this household of 5. When Sora applied for KYC, the bank gave her a ‘token’ with an appointment for 27 December 2024. Here she explains how people like her get pushed around at the bank. pic.twitter.com/PjTvsrybtQ
Advertisement— Road Scholarz (@roadscholarz) October 22, 2024
“Urmila Oraon is a resident of Kandra in Lohardaga district. Her family has 7 members, out of which 6 have bank accounts – all of them are frozen due to KYC issues. She recently stood in queue for two full days at the bank, but nothing came out of it. She was simply told to go back home,” the survey noted.
There are numerous such instances where either inconsistencies in names, addresses, or any other information, the responsibility for all of which should be borne by government agencies, have led to automatic freezing of bank accounts of numerous people. Yet, the account holders have found themselves trapped in complex bureaucratic nets to access their own savings, even as the government agencies have shown wilful neglect or simply turned a blind eye towards this widespread problem, the survey said.
“KYC (Know Your Customer) 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,” the survey noted.
The problem has worsened because of “overcrowding in rural banks”, the survey said. In both the survey areas, there were long queues at the local banks. The crowds consist largely of people trying to complete KYC, or women who are looking for their Maiya Samman Yojana money,” it said.
The survey inferred, “This crisis reflects the growing insistence of banks on periodic KYC, under pressure from the Reserve Bank of India. One local bank manager explained that he had a backlog of 1,500 KYC applications, against a processing capacity of just 30 KYCs per day.”
“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? This entire process needs urgent review,” it recommended.
