Banking · Know Your Customer (KYC)
Review the operational guidelines for the 'Partial Freezing' of accounts and the subsequent closure of accounts when KYC documents are not updated. Statement 1: If a customer fails to provide the required KYC documents for periodic updation, the bank must first give a notice of at least three months to the customer to provide the information. If the customer fails to comply within this period, the bank can impose a partial freeze where credits are allowed but no debits are permitted. Statement 2: Following the initial partial freeze, if the customer still does not provide the documents within the next six months, the bank shall impose a total freeze on the account, where neither credits nor debits are allowed. Statement 3: Even after a total freeze is imposed, the bank has the authority to unilaterally close the account and remit the balance to the customer's last known address via a demand draft. Which statement represents the correct operational sequence for handling non-compliance in periodic KYC updation?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
- 1None of the statements are correct because the bank must report the customer to the police and close the account within 48 hours of the KYC expiry date.
- 2Only Statement 1 is correct, while Statement 2 is incorrect because the total freeze happens immediately after three months, and Statement 3 is incorrect because the balance must be forfeited.
- 3All three statements are correct as they represent the standard procedure for dealing with non-compliant customers while ensuring the customer is not unfairly penalized without notice.
- 4Statement 1 and Statement 2 are correct, but Statement 3 is incorrect because banks are not allowed to unilaterally close accounts; they must keep them in a frozen state until compliance.✓
Correct answer
Statement 1 and Statement 2 are correct, but Statement 3 is incorrect because banks are not allowed to unilaterally close accounts; they must keep them in a frozen state until compliance.
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