Banking services in India need major improvements as a significant number of customers face difficulties accessing their accounts online. According to a recent survey by Local Circles, 34% of families have at least one member who cannot access their bank account online due to issues such as inactive accounts, login problems, or Know Your Customer (KYC) verification failures.
KYC and Dormant Account Issues Affect Majority of Users
The survey revealed that 63% of families struggle to access one or more of their bank accounts online. The main reasons for this include:
- KYC verification failures
- Login credentials not working
- Accounts classified as “dormant” by banks
These problems create major inconvenience for customers, especially those who rely on timely access to their funds for daily transactions. Many families reported frustration with banks, stating that resolving these issues takes a long time and requires multiple visits to bank branches.
Survey Covers Over 54,000 Consumers Across India
The Local Circles survey gathered responses from more than 54,000 consumers across 334 districts in India. Among the respondents:
- 67% were men, and 33% were women
- 42% were from Tier 1 cities
- 27% were from Tier 2 cities
- 31% were from Tier 3 and Tier 4 districts
These findings highlight that banking access issues are widespread and affect customers in both urban and rural areas.
Banks Criticized for Inefficiency and Bureaucracy
Apart from technical issues, 59% of surveyed families found their banks to be bureaucratic and inefficient when trying to regain online access to their accounts. Many customers complained about long wait times, excessive paperwork, and unhelpful customer service.
This is especially concerning in light of the Reserve Bank of India’s (RBI) new guidelines. According to RBI rules, a bank account will be classified as “inoperative” if there are no customer transactions for over two years. This includes both financial transactions (such as deposits and withdrawals) and non-financial transactions (such as KYC updates and balance inquiries).
RBI Governor Urges Banks to Improve Customer Service
The survey results come at a time when RBI Governor Sanjay Malhotra has warned banks about a growing number of customer complaints. Under the RBI’s Integrated Ombudsman Scheme, customer complaints have surged by nearly 50% annually over the past two years. Malhotra stressed that banks must prioritize customer service to remain competitive in the financial sector.
To address these issues, the RBI has issued new rules that will take effect from April 1, requiring banks to ensure a smoother process for customers dealing with dormant accounts and KYC compliance.
KYC Rules Impact Rural and Low-Income Households
KYC regulations are intended to prevent fraud and money laundering, but they have also created barriers for economically disadvantaged individuals. A report by the Economic and Political Weekly (EPW) in November 2024 pointed out that many poor and rural customers struggle to meet KYC requirements due to issues such as:
- Difficulty in linking Aadhaar cards
- Lack of proper documentation
- Limited access to banking facilities
In some districts of Jharkhand, surveys found that up to 60% of households had at least one frozen bank account due to KYC-related issues. Many of these accounts belonged to elderly pensioners, students receiving scholarships, and women dependent on government welfare schemes. The inability to access their accounts has left them in financial distress.
Conclusion
The survey highlights the urgent need for banks to improve their digital services and customer support. While regulations like KYC are important for security, banks must ensure that these rules do not create unnecessary obstacles for customers. With RBI’s new directives coming into effect soon, banks will need to focus on improving their processes and making online banking more accessible for everyone.
