Every few days, social media highlights the relentless struggles of India's marginalised communities: caste discrimination, bonded labour, lack of healthcare, inadequate infrastructure, rampant corruption and exploitative interest rates. From bankers to the police, everyone agrees that the poor bear the brunt of a heartless system—one that remains largely unchanged even 77 years after Independence.
This was supposed to have changed a decade ago, with the much-hyped JAM trinity (Jan-Dhan bank accounts linked with Aadhaar and a Mobile number). It was touted as the magic solution to ‘deliver subsidies and social benefits directly to the underprivileged’ through large-scale direct benefit transfers. The prime minister’s website describes it as a ‘mission mode’ endeavour to provide millions with banking access, claiming it ‘radically transformed lives’ and even set a Guinness World Record for the most bank accounts opened in a week.
While the ‘mission mode’ approach delivered large numbers, unfortunately, it prioritised targets over proper verification and banks opened many Jan-Dhan accounts without proper authentication of Aadhaar. A decade later, the re-verification of documents under the know-your-customer (KYC) process is wreaking havoc. These ‘low-risk’ accounts are being frozen or closed due to documentation issues, effectively inflicting 'financial death' on vulnerable account-holders.
Banks, which are freezing thousands of accounts, point to regulations of the Reserve Bank of India (RBI); RBI, in turn, attributes the stringent KYC norms to anti-money laundering mandates from the finance ministry. Despite significant public frustration, especially in rural areas, little has been done to address the root causes or mitigate the severe impact on people.
Activists, like welfare economist Jean Dreze, have been raising the alarm about the account freezes since 2018, highlighting the suffering of people across rural Jharkhand and Chhattisgarh. The lack of a viable solution has led to an exponential rise in frozen accounts, especially among rural Indians, who face insurmountable hurdles due to mismatched documentation. A PMO-driven ‘mission mode’ effort to rectify these errors is desperately needed; yet, it is nowhere in sight.
Surveys by Mr Dreze and a team of volunteers and activists reveal a grim reality: elderly individuals relying on meagre pensions, scholarships of school-going children and women depending on State welfare are all facing account freezes.
This is because the JAM trinity's model rests on two flawed assumptions. First, that every Indian can afford to maintain an active mobile connection and that there’s sufficient network coverage in rural areas.
Secondly, in the absence of adequate infrastructure, the process of updating and authentication is a punishment. People have to travel long distances, sometimes as much as 50 kilimeters and queue up for entire days at Pragya Kendras (in Jharkhand) only to get a token. They need another visit to get their biometric authentication and a verification certificate which has to be submitted to the banks after filling another form. This leads to a loss of income, with no resolution.
Consider the plight of Sora Oraon from Dhanamunji. She queued all day at the bank only to receive a token for a re-KYC appointment two months later on 27th December. Her family of five has three frozen accounts. If the re-KYC isn't completed by December-end, the accounts would remain indefinitely frozen. One bank manager reportedly has a backlog of 1,500 KYC applications and can process only 30 a day—indicating a two month wait for most people.
If urban accounts were similarly affected, the public outcry and media coverage would have pressured the authorities into action. But the suffering of dis-empowered rural communities remains unnoticed.
Why Is KYC Especially Burdensome for the Rural Poor?
The answer is revealing. Aadhaar was championed by billionaire Nandan Nilekani as a unique, biometric solution that would provide an ID to every marginalised Indian lacking formal identification. It was made mandatory for availing various welfare benefits including the national rural employment guarantee scheme (NREGA).
But, instead of conducting proper biometric verification when opening Jan-Dhan accounts, banks often met targets by simply seeding Aadhaar numbers, sometimes based on flawed, second-hand information, says Mr Dreze. Later attempts at biometric verification for the KYC process failed for multiple reasons, leading to blocked accounts. The re-KYC process has thrown up many more inconsistencies between Aadhaar, bank records and other IDs such as job cards and PAN (permanent account number) leading to largescale freezing of accounts. Some of the recurring issues include:
1.Data Inconsistencies: Differences between Aadhaar and bank records force people to resubmit corrected documents or provide alternate identification like PAN cards. Biometric verification becomes challenging due to poor-quality scanners, calloused fingers and the lack of iris scanners in rural areas where even internet access is spotty.
2.Bank Negligence: Banks, aware of poor data-entry during account setup or Aadhaar enrolment, still insist on absolute data consistency but offer no solutions, opting to freeze or close accounts instead. This affects access to welfare schemes, ration supplies and subsidies linked to Aadhaar-seeded accounts.
3.Data-entry Errors: Spelling variations, typos and transcription errors have plagued ID cards all over India, the number of mistakes is far worse in rural areas because of the quality of data-entry. The government offers no easy solution or resolution for the problems nor the infrastructure to make it happen quickly. Here are a few examples:
a.Bhola Oraon and Basant Oraon, residents of Kendra, have their names misspelled on their Aadhaar cards as "Bhoula Oraon" and "Basnt Oraon."
b.Sairta Oraon, whose Aadhaar lists her name as "Archana" for unknown reasons, has faced an account freeze for three years.
c.A desperate Ashok Parihaiya of Latehar ended up being conned into paying Rs150 each to an operator who promised to update the KYC of his children whose banks accounts are lying frozen.
d.Sangeeta Devi paid a bribe of Rs1,000 to a computer centre operator to have a mistake in her Aadhaar card rectified. She has two children and a visually impaired husband, whose bank account is frozen due to re-KYC issues. Her children cannot get Aadhaar cards unless she raises money to bribe the computer centre operator.
e.Bhola Ram’s name is spelt correctly in passbook but is entered as Bhoula Ram on his Aadhaar card.
f.Many others have their account frozen because their names are spelt or arranged differently on the Aadhaar, the bank account and their MNREGA job cards, for no fault of theirs.
Surveys in Jharkhand by Mr Dreze’s team found that 60% of households in some villages had at least one frozen bank account, some households have multiple accounts frozen. The sheer volume of affected individuals reflects the magnitude of the crisis, which has largely gone ignored—even by the philanthropic billionaire and his cohorts who champion Aadhaar's bountiful benefits.
A Call for Reform
Resolving this issue requires empathy and a results-focused approach. KYC documentation is, indeed, important, but it cannot be a source of harassment for the poor. No person ought to be deprived of social benefits or their hard-earned savings because of typos or errors introduced by data-entry operators, which can be corrected. We need quick practical solutions.
Long before a uniform civil code, India needs empathy-driven reform across the KYC framework. Another mission-mode initiative is needed to standardise and correct data discrepancies across various ID cards (PAN, Aadhaar, voter ID, passport, and driving licence), which would prevent such issues in the future. If anti-money laundering and clear identification are the goals, the process for updating identity documents must be simpler and standardised. Instead of Aadhaar-enabled financial empowerment, rural India is experiencing Aadhaar-driven financial exclusion. This must change immediately. If politicians from the two states surveyed by Mr Dreze—Jharkhand and Chhattisgarh—raise this issue in Parliament and through social media, it will surely lead to some action.
The Central Govt has pumped in 250 cr in BSNL to make Edge data centers & launch 4G services . Within 90 days 35 edge data centers have been created. Another project BharatNet to provide fibre connectivity across villages is also running in parallel. Politics aside never before such huge infrastructure has been invested into. Pessimists can continue to peddle only problems without giving solutions.
Creating awareness about the issue is the first major step which the MoneyLife Foundation has done. If we can get volunteers from nearby urban areas to spend at least a day each helping the rural folk resolve the KYC errors with the bank branches, I think it would go a long way in alleviating their miseries.
Sucheta Dalal has done a great service by publishing this report. If this is the grim picture of Jharkhand and Chattisgarh, there is no reason to believe that for rural people of other states, position will be different. As per GOI claims all reimbursement of monetary help is reimbursed. Then the question arises where that money has gone which could not be paid to 75 perecnt of accounts which are frozen in CHattisgarh village? Who will unearth this another big scam of the much touted welfare schemes ?
The problems described in the article are genuine ones. Similar problems are faced by those who have not linked their aadhar with PAN. In their case their PAN has become inactive. As a result of this pensioners face a unique problem. The Banks deduct huge amounts from the monthly pension as TDS. This forces the pensioners to take action to link aadhar with PAN. The trouble starts when this process of linking is initiated. The discrepancies in the spelling of names in these documents gives rise to similar troubles as mentioned in the article. But the article falls short of suggesting any solutions other than mentioning that the process for updating identity documents must be simpler and standardised. One suggestion can be allowing human interference in reconciling such descrepancies in the spelling of names. Human can understand the issue easily and allow linking without going through the long and tortuous route of changing the names in the documents. Machine matching through artificial intelligence may not achieve this result easily. The endeavour should be redress the grievances in the shortest possible time rather than sticking to some wrongly conceived procedures.
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This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
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Secondly, in the absence of adequate infrastructure, the process of updating and authentication is a punishment. People have to travel long distances, sometimes as much as 50 kilimeters and queue up for entire days at Pragya Kendras (in Jharkhand) only to get a token. They need another visit to get their biometric authentication and a verification certificate which has to be submitted to the banks after filling another form. This leads to a loss of income, with no resolution.
Long before a uniform civil code, India needs empathy-driven reform across the KYC framework. Another mission-mode initiative is needed to standardise and correct data discrepancies across various ID cards (PAN, Aadhaar, voter ID, passport, and driving licence), which would prevent such issues in the future. If anti-money laundering and clear identification are the goals, the process for updating identity documents must be simpler and standardised. Instead of Aadhaar-enabled financial empowerment, rural India is experiencing Aadhaar-driven financial exclusion. This must change immediately. If politicians from the two states surveyed by Mr Dreze—Jharkhand and Chhattisgarh—raise this issue in Parliament and through social media, it will surely lead to some action.
