State-owned banks have received guidance from the government to close Jan Dhan accounts whose beneficiaries are unwilling to keep them active, amid rising instances of such accounts being misused by fraudsters as mule accounts to defraud people, people aware of the development said.
“If they are not being used, the guidance is not to insist on keeping them open, as they could be misused,” said a source familiar with the development.
That said, banks are following the due process to reactivate inoperative accounts by initiating re-KYC procedures.
However, if beneficiaries are unwilling to keep the accounts active, such accounts are being closed by the banks.
A bank account is classified as “inoperative” if there are no “customer-induced transactions” for a continuous period of 24 months.
According to a senior banker at a state-owned bank, mostly the inoperative Jan Dhan accounts are from the rural parts of the country.
“All the banks are trying to address it and trying to get the re-KYC done to make it operative.
"Otherwise, if the depositors are not wanting to use those accounts, such accounts are also being closed," he said.
The concern arises from the increasing misuse of some Jan Dhan accounts by fraudsters as “mule accounts” to carry out cyber fraud. In recent years, such instances have risen significantly, prompting the Reserve Bank of India (RBI) to launch the “Mule Hunter” initiative to trace and track these accounts.
Developed by the Reserve Bank Innovation Hub is an AI/ML-based model, that is designed to help banks identify and trace mule accounts—bank accounts that are used by cybercriminals to route or launder money obtained through fraud.
“We have observed that some of these Jan Dhan accounts are being used as mule accounts for cyber frauds.
"We have been very cognizant of this issue. The RBI has launched 'Mule Hunter', which helps trace such accounts within banks.
"In Bank of India alone, over the last six months, Rs 147 crore of depositors' money has been affected,” said Rajneesh Karnatak, MD&CEO, Bank of India, at an event on Friday in Mumbai.
According to RBI data, there were 13,516 frauds in the digital payments category in FY25, the most in banking.
Such frauds comprised 56.5 per cent of total cases and involved Rs 520 crore.
Further the central bank has observed that frauds mostly occurred in digital payments (card/internet) in terms of number and primarily in the loan portfolio (advances) in terms of value.
Card/internet fraud comprised the largest number of cases reported by private-sector banks.
“Multiple accounts were mostly opened in 2014-15 under the wrong notion that more accounts would bring more benefit as part of the Direct Benefit Transfer (DBT) scheme.
"Now DBT has stabilized giving clear assessment about which accounts receive benefits.
"The other accounts remain inoperative, exposing them to risks of misuse like cyber fraud or money laundering”, said a senior State Bank of India (SBI) executive, on the condition of anonymity.
“After 10 years of operations, the accounts under Prime Minister Jan Dhan Yojana (PMJDY) are up for re- KYC.
"The task of re-KYC is huge given crores of accounts.
"The inoperative accounts will have to be ring-faced and ideally closed”, he said, adding that the closing of such accounts is a sensitive matter as they are under PMJDY.
Any direct decision by banks to close accounts can lead to complications, especially if the impact on beneficiaries is overlooked.
The way forward is for the Prime Minister’s Office (PMO) and the Ministry of Finance to take the lead in deciding on the closure of inoperative Jan Dhan accounts.
The re-KYC exercise is expected to be time-consuming due to the sheer volume of accounts and the direct responsibility of banks for completing KYC.
Therefore, there is a need for an additional 1.5 years to complete the re-KYC process for Jan Dhan accounts.
The RBI should take this concern into consideration, he further added.
Under the Pradhan Mantri Jan-Dhan Yojana (PMJDY) – a national mission for financial inclusion to ensure access to financial services – a basic savings bank deposit (BSBD) account was opened in any bank branch or Business Correspondent (Bank Mitra) outlet, by persons not having any other account.
As of June 25, 557 million accounts have been opened under the PMJDY scheme.
These accounts collectively have Rs 2.60 trillion in deposits.
Of the 557 million accounts, 310.6 million accounts belong to female beneficiaries.
Over 370 million accounts of the total accounts opened are in rural and semi urban bank branches while 185.3 million branches are in urban metro center branches.
Business Standard reported in January 2025 that more than one in every five accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY) had turned inoperative by December 2024.
Inoperative Jan Dhan accounts rose from 19 per cent of total accounts in March 2024 to 21 per cent in December that year.
