Can banks freeze a customer's account for non-compliance with Re-KYC (KYC review)?

Shivaprasad Laxman Chhatre | Last updated: 29 August 2022

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This article clarifies whether banks have the authority to freeze customer accounts due to non-compliance with Re-KYC (Know Your Customer) requirements. It highlights that the Reserve Bank of India (RBI) has not issued direct instructions authorising banks to freeze accounts solely for pending Re-KYC, especially after amendments in 2018. The piece discusses past directives, current ambiguities, and customer harassment, referencing a Gujarat High Court ruling that banks cannot freeze accounts for non-compliance, but may close them with prior notice.

Neither RBI on its own can direct, a partial or total freeze of Re-KYC due (non-compliant) bank account nor it can delegate such authority to any bank/branch to impose such a freeze. RBI has formally confirmed that the directions it had given in Sept 2014 were applicable before the amendment on 20th

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About the Author

Shivaprasad Laxman Chhatre

Ex Chief Ethics and Compliance BNP Paribas

Ex Group Head Ethics and Compliance BNP Paribas, Kotak Mahindra Bank, ICICI Bank, PSU Banks, Ex- CEO FIMMDA, Practical ex-Banker 35 years of supervisory level banking experience which includes the experience as Group Head of Compliance of an MNC Bank, 15 years in Bank Treasury amp; Securities Market (in New Private ... Read more

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