RBI Proposes Simplified Process to Reactivate Dormant Bank Accounts and Strengthen Fintech Engagement

In a move aimed at making banking more accessible and inclusive, the Reserve Bank of India (RBI) has unveiled a draft amendment that proposes a simpler process for reactivating inactive bank accounts and claiming unclaimed deposits. The initiative addresses the persistent challenges faced by account holders—especially those in rural and semi-urban areas—in complying with Know Your Customer (KYC) requirements to restore access to their dormant funds.

Under existing rules, any bank deposit that has not seen any customer-initiated activity for a period of 10 years or more is declared inoperative. Once classified as such, the amount must be transferred to the Depositor Education and Awareness (DEA) Fund, a corpus managed by the RBI itself. Despite the regulatory safeguard of the fund, many customers have struggled to reclaim their deposits due to procedural complexities, with KYC compliance being a key stumbling block.

Recognizing these difficulties, the RBI has proposed several significant changes through an amendment to its earlier circular dated January 1, 2024. Among the most notable is the requirement that “banks are now required to permit customers to update their KYC information at all branches, including those not designated as their home branches, to facilitate the activation of dormant accounts.” This change eliminates the need for customers to visit their original home branch—a task often burdensome for people residing in remote areas or those who have relocated.

Additionally, the central bank is encouraging the use of video-based solutions to bridge the accessibility gap. According to the proposed amendment, “should customers request it, banks may use the video Customer Identification Process (V-CIP) to remotely update KYC. However, this option is contingent on whether the bank provides the V-CIP service.” While not mandatory, the inclusion of remote KYC through video verification can offer a crucial lifeline for customers unable to travel or access a branch physically.

To further extend outreach in underserved regions, the RBI is also leveraging the support of authorised intermediaries. The amendment states that “banks can now engage authorised business correspondents (BCs) to collect KYC documents and assist customers in reactivating inactive accounts.” The move is designed to empower local banking agents with the authority and tools to guide account holders through the reactivation process, thereby fostering greater financial inclusion.

These proposed adjustments align with the broader framework of the RBI’s KYC Master Direction introduced in 2016. The directive, which has undergone regular updates, underpins the central bank’s strategy to promote digital adoption while upholding compliance and risk management standards across the banking ecosystem.

The RBI’s commitment to encouraging innovation and access extends beyond traditional banking services. In April 2025, the central bank launched a ‘Theme Neutral’ application facility under its evolving ‘On Tap’ Regulatory Sandbox (RS) framework. The new facility marks a notable departure from previous cohort-specific models and is designed to “encourage positive changes in the fintech sector” by allowing continuous engagement with fintech startups and technology teams without the constraint of pre-defined themes.

Previously, the RBI had concluded four thematic cohorts under the sandbox model and had, in 2021, introduced an ‘On Tap’ mechanism for closed themes. The latest development—the ‘Theme Neutral’ option—represents a significant broadening of this approach, creating a flexible environment where innovators can propose solutions year-round. This pivot has been driven by extensive feedback from stakeholders, aiming to “support innovation while ensuring regulatory compliance.”

With these latest initiatives, the RBI continues to position itself at the forefront of balancing financial regulation with accessibility and innovation. Whether through modernizing the reactivation of dormant accounts or embracing a more open framework for fintech experimentation, the central bank is reinforcing its role as both a guardian and a facilitator of inclusive banking in India.

By fLEXI tEAM