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The RBI has directed regional rural and central cooperative banks to partially freeze bank accounts of those customers who have not complied with the Know Your Customer (KYC) norms.
Similar instructions were issued to commercial banks by RBI last month.
"Banks may impose partial freezing by allowing all credits and disallowing all debits with the freedom to close the accounts.
"If the accounts are still KYC non-compliant after six months of imposing initial partial freezing, banks may disallow all debits and credits from/to the accounts, rendering them inoperative," RBI said in a directive to the banks.
RBI said banks will be free to take decision on closing of accounts of such customers.
While imposing 'partial freezing', RBI said banks are advised to ensure that the option is exercised after giving due notice of three months initially to the customers and followed by a reminder for further period of three months.
Meanwhile, the account holders can revive accounts by submitting the KYC documents as per instructions in force.
The RBI notification also said banks need not seek fresh proofs of identity and address at the time of periodic updation, from those customers who are categorised as 'low risk', in case of no change in status with respect to their identities and addresses.
"A self-certification by the customer to that effect should suffice in such cases," it said, adding that in case of change of address of such 'low risk' customers, they could merely forward a certified copy of the document by mail/post.
Further, RBI also asked them not to insist on physical presence of such low risk customer at the time of periodic updation, the RBI said.
