Banks are freezing accounts of customers if credit in accounts is more than the declared income.
Customers are getting frustrated and one such case reached the Allahabad High Court.
The Lucknow Bench of the Allahabad High Court has shown concern over banks freezing customer accounts without proper reasons. The Court said that a bank acts like a trustee, so it should not behave like an investigating agency.
A Division Bench of Justice Shekhar B. Saraf and Justice Awadhesh Kumar Chaudhary fined Indian Overseas Bank ₹50,000. The bank had frozen a customer’s account without valid grounds. The Court ordered the bank to pay this amount to the account holder within four weeks.
The case is related to a company named M/s S.A. Enterprises, which deals in fish farming machinery. The company filed a petition against the bank.
As per the petition, ₹23 lakh was credited to the company’s account through RTGS on January 16, 2026. The bank treated this transaction as suspicious and froze the account. The bank said that at the time of opening the account, the company had declared an annual income of only ₹5.76 lakh. Based on this, and citing the Prevention of Money Laundering Act, the bank froze the account.
The High Court noted that the account was not frozen based on any cybercrime report. The bank acted on its own and behaved like an investigating agency. The Court clearly said that banks cannot decide the source of funds on their own. To freeze an account, there must be an order from agencies like the Police, the Enforcement Directorate, or the Central Bureau of Investigation.
The Court also said that freezing accounts without proper reasons is a worrying trend. Such actions can stop business activities and damage the reputation of account holders.
Banks should find out a solution for this problem as it’s creating severe problems for customers.
