Aadhaar E-KYC Menace: 75% Village Households Have At Least 1 Bank Account Frozen!
Moneylife Digital Team 22 October 2024
Lohardaga, Jharkhand-based Urmila Oraon's family of seven have six bank accounts. But all the bank accounts are frozen – mainly due to know-your-customer (KYC) issues. Three accounts in Sora Oraon's family are frozen and when she applied for KYC, the bank gave her a token appointment for 27 December 2024! 
 
The case of Bhola Oraon is also related to KYC issues but at a different level altogether. His bank account has the right spelling of his name, but his Aadhaar card shows his name as 'Bhoula Oraon'. Result? His bank account is also frozen. The same is the case with Basant Oraon, whose bank account is frozen because his Aadhaar shows his name as Basnt Oraon.
 
The most strange case is of Sarita Oraon. For the past three years, her bank account has been frozen. Reason? Her Aadhaar card mentions her name as Archana. All attempts to resolve the problem have failed so far – ditto with Bhola Oraon and Basant Oraon.
 
These are just a few examples shared on X by Road Scholarz (@roadscholarz), a handle maintained by freelance scholars and student volunteers interested in action-oriented research, socio-economic rights and related issues. It says, "Notice how all these discrepancies are due to wrong data entry in Aadhaar cards. Everyone knows that demographic details in the Aadhaar database are unreliable – then why insist on 100% consistency with Aadhaar in bank accounts?"
 
"These are just a few examples from three villages. Amongst the 147 households we surveyed in these three villages, 75% had at least one frozen bank account. Under which law or powers are banks indulging in this financial terrorism?"
 
 
As reported by Moneylife, most of these accounts were opened in 2014 under the Pradhan Mantri Jan Dhan Yojana (PMJDY). As per the Reserve Bank of India (RBI) norms, for low-risk customers, updating KYC needs to be done once every ten years from the date of opening the account or the date of the last KYC update.
 
In an article in 2018, noted activist Jean Dreze, who has spent decades working with India's poorest people, wrote, "A myth has been created that Aadhaar enabled millions of people to open PMJDY accounts within minutes, using biometric authentication. In fact, most of these accounts were opened without biometric authentication by seeding Aadhaar numbers from Aadhaar cards or even second-hand information. Biometric verification (in the form of 'e-KYC') was imposed later on and became a serious ordeal for poor people. Failure of e-KYC often leads to the discontinuation of benefit payments or to people being locked out of their accounts, temporarily or permanently." (Read: How KYC Freeze of the Jan-Dhan Account-holders Is Destroying the Lives of the Poor)
 
While activists like Mr Dreze are quick to point out bank KYC issues in Jharkhand villages to find a solution to the KYC havoc created by the system, it could possibly be the same case across the country.  
 
Rural and economically backward Indians were asked to open Jan-Dhan accounts on the promise that their sole identification—the Aadhaar card issued by the UIDAI—was adequate. 
 
The only issue is that the last-mile data entry in India is so poor that it leads to glaring errors in the spelling of names across different certificates and mistakes in date of birth and other demographic details of people. 
 
In addition, the problems with biometric authentication, especially for those with calloused and work-worn hands, is well known.  
 
In short, for every bank account-holder, it is definitely a Herculean task to first rectify their Aadhaar and then keep visiting the bank to complete KYC. 
 
In addition, there is a lack of proper infrastructure and internet bandwidth to carry out the e-KYC at bank branches in rural areas. 'Server down' or 'No network' are the two most common causes customers face in these branches. Add to this, lack of manpower and you will realise why a customer needs to visit the branch repeatedly for any work. 
 
This also explains why Sora Oraon has been given her KYC appointment after more than two months. But even then, there is no guarantee that her KYC would be completed and her account would be unfrozen.
 
In other words, Aadhaar, the one pill for every ill, is turning out to be the biggest hurdle causing financial death on poor villagers.
 
In March 2021, Moneylife Foundation sent a memorandum to the governor, Reserve Bank of India (RBI), on the harassment caused to ordinary depositors by the draconian action of blocking access to their own money on the grounds that KYC documents were not updated. (Read: Moneylife Foundation Impact: RBI Implements the Main Recommendations of MLF Memorandum on KYC)
 
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Comments
aereopagitica664
1 month ago
My ‘re-kyc” experience with a nationalised bank. “Voluntarily” coerced to do “re-kyc” using UID (alias Aadhaar) for domestic gas, banks , what next? :
(1) Message after message to frighten the customer.
(2)Account gets blocked except for credits.
(3)Search the internet and find a bank pamphlet that clearly shows that if there are NO changes then KYC can be done by SMS, Internet banking or at ATM!
(4)Search internet banking and find that there is no “re-kyc” option available under “other services” or anywhere else.
(5) Visit the branch and I’m told , “ No, you have to be present in person only. No forms will be given(a story is dished out as to why forms are not given to be filled and signed at home). All forms must be signed in front of the staff only. “Aadhaar” copy is a must.
(6) If you have a joint account then both persons must be present at the same time and sign right in front of the staff.
(7) After 2 visits to the branch to inquire; finally, visit the branch 3rd time , only to be told that the concerned staff is on leave.
(8) The branch manager agrees to be helpful and request another staff to help out. But, only the forms and photocopies and signature work will be done. The OTP (??) will be sent the next day as there is staff shortage.
(9) Poorly “Xeroxed” forms are handed out to fill. Nowhere on the form does it mention “Re-KYC”.
(10) Note that I have NO changes to make at all to my KYC.
(11) I am told to fill in account details, email id, phone no. and sign at the bottom. The form heading and at every line, mentions that you wish to “change” your email id, “change” your phone no. etc.
(12) I give a new heading to the form: Re-KYC.
(13) I strike out “I wish to change” and fill the details requested and sign my signature that I have been signing for 4 decades.
(14) I provide self-attested copies of voter id and PAN.
(15) “where is aadhar?” . I ask “why you need “aadhar”?.” without aadhaar no KYC”. I tell the staff that the bank cannot force anybody to provide aadhaar only. I remind him that my UID is linked with PAN as per regulations. Then, i am told that aadhaar is required as per procedures to generate OTP.
(16) I show my UID print out to the staff and tell him that I shall not provide copy of it. Let the bank refuse my KYC , then I shall take up the matter with RBI.
(17) We are then given signature cards, photo is stuck on the card, we are told to sign, 2nos signatures - line 1 and line 2.
(18) Next day, bank staff kindly calls and alerts us about OTP. We provide the OTP and we are told that we could resume using the account from evening.
(19) The million dollar question: after insisting that we must be present “habeas corpus” and sign right in front of the staff; then, why on earth does verification have to be done via UID?
(20) I receive email : Quote ..........We have modified your signature for customer id ....... in our records. If you have not requested for change of your signature contact branch immediately. Signature change information message........Unquote.
(21) Whaaat? You force me to do re-kyc when I had no changes to make, you block my account, you force me to be present in body, you give me forms and cards to fill and sign, you say joint account-holders have to be present at the same time, then you claim that I had “requested for a signature change”.
(22) Nowhere am i told, “your re-kyc has been done as per RBI and Finance Ministry regulations”! WHY is this fact not openly admitted?
(23) I do not receive any message from UIDAI that someone used my UID info. for authentication.

barokhoka1956
1 month ago
I am unable to attend how a person holding six bank accounts can be addressed as poor.
MDT
Replied to barokhoka1956 comment 1 month ago
The article nowhere mentions that one person is holding six accounts. These are bank accounts of family members. Also, remember, when PMJDY was launched, banks were given a target to open as many accounts as possible. Banks opened lakhs of accounts in rural areas for anyone with just an Aadhaar.
barokhoka1956
Replied to MDT comment 1 month ago
Thanks. I mean a family.
Meenal Mamdani
1 month ago
GoI wants to introduce modern technological formats to make sure that the bank accounts are not misused by people with black money. Yet it is the poor people who are affected and the havala dealers go scot free.
Ms Dalal and ML Foundation had emphasized this point when the Aadhar number was introduced and she has been proved right.
If the GoI is serious about rooting out black money and helping law abiding citizens conduct economic transactions, it must insist on the banks having a dedicated person to help these customers.
All customers are important, not just those with fat bank balances.
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