Your Bank Account May Freeze After January 1, Know What is the Reason and What to Do

Your bank account and some other financial services may be frozen after January 1, 2022. In the new year, this blow can be given to customers for not submitting their ID and address proof documents. The reason is- Reserve Bank of India (RBI)’s moratorium on the action by banks against customers who do not comply with Know Your Customer (KYC) norms will end on 31 December 2021.

In such a situation, the KYC validity of hundreds of customers can expire at any point in time. However, there may be some action, as RBI has asked banks not to insist on KYC in view of the second wave of coronavirus pandemic. The need to update KYC norms is not only for banks but for every regulated financial institution. This is because it is part of anti-money laundering laws. This includes finance companies, mutual funds, broking houses, and depositories.

Bankers say that for customers in low-risk accounts, KYC needs to be updated once every 10 years. However, those classified as high risk will have to update their account once every two years. In addition, new KYC updates are required to unfreeze or reactivate dormant and deactivated accounts.

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By the way, most customers only need to update once in 10 years. According to bankers, more frequent updates are needed when documents produced in some cases may not be part of the list of officially valid documents. Also, where the customers have changed the account and the communication letter is returned to the bank, the KYC will have to be done afresh.

Regulated entities, including banks, now have several options to comply with KYC norms. These include sharing of documents through video KYC, Digilocker. Yet many still have not complied with it. Since cases of phishing attacks have also increased in the online era. In view of the number of such fraud cases, customers have also become more cautious and careful about the use of KYC with the messages and calls related to it.