Find out why your bank account is on hold? Learn the common reasons why your account is frozen and what to do if it happens to you!
If your bank has placed a hold on your account, it likely means that something unusual has happened. It could be that your account is inactive or you have tried to withdraw more funds than the balance allows.
In any case, understanding why there’s a hold on your account and how to handle the situation can help you navigate the issue quickly and painlessly.
We have compiled some of the common issues which lead to account frozen. This can be avoided if you properly manage your bank account.
Your bank may place a hold if you have unpaid bills. Utility companies, hospitals and other organizations often enter into agreements with banks to help ensure that customers pay their bills on time.
If the agency involved suspects any untoward activity, it may contact your bank for assistance. In such cases, your bank account could be frozen until the balance is paid in full.
Sudden Changes in Account Activity.
Banks also freeze accounts that show unexpected or unusual activity. For example, if you suddenly deposit large amounts of money into your account or withdraw very large sums of money over short periods of time, your bank may put a hold on your account.
This is usually done to protect both the bank and the customer from fraud or theft. In some cases, banks will request additional information from you before they remove the freeze.
Suspected Fraud or Identity Theft.
Banks often have to freeze accounts in cases of suspected fraud or identity theft. If the bank finds unauthorized transactions on your account, that may be a sign of illegal activity.
In this case, it is important for you to contact the bank quickly and explain your situation. The bank can investigate and help resolve any issues related to fraud or identity theft.
The going trend of fraud occurrence is quite unbelievable. The public money that are involved in it is staggering. In fact, its figures go in terms of millions of money. To avoid these, banks formulated stringent protocol to get early warning of fraudulent transactions.
So, when multiple transactions happen in an account through an ATM Or online, system triggers suspected transaction to the regulatory authority which leads to blocking or freezing of a bank account.
Overdraft Fees and Penalty Costs Accumulated Over Time.
Another common cause for a bank account to be frozen is extreme overdraft fees or penalty costs which accumulate over time.
Most banks will take preventative steps if the account holder continues to find themselves in overdraft, such as freezing the account and requiring the payment of all fees due before access to the funds is granted again.
If you’ve accumulated bank fees or been overdrawn on your account multiple times, this could be why it has been frozen.
Court Order or Legal Judgment on Your Bank Account Funds.
If a legal judgment is granted against you and the debtor has obtained a court order to freeze your account, this too can cause your bank account to be frozen.
A court order will allow them to direct the bank to hold the funds available in your account until the debt has been paid off.
In most cases, a notification letter informing you of the freeze or automatic withdrawal of some of your funds should have been sent by the court either via mail or by email.
Know Your Customer-KYC Deficient Account.
KYC documents are the main source to open an account. Your personal details in an account is derived from KYC documents only. Without proper identification documents your account will be freezed sooner or later.
But the case here is somewhat different. When you already have an account, why do you need to submit these documents again? The bank account contract says these documents are to be update every now and then. As per regulations given by the reserve bank, the frequency to resubmit your KYC documents goes like this.
|Risk Category Of An Account||KYC Documents Frequency|
|Low Risk- All salaried account holder and Government account.||After 8 Years|
|Medium Risk- Small business firm.||After 2 Years|
|High Risk- Risk involved account such as business unit with high volume of transaction.||Every 1 Year|
Whenever there is a deficient or KYC compliance due, banks usually notify to its customer with multiple reminders. If the account user do not respond to it, bank freeze these accounts till the documents are received.
When You Don’t Use The Account For More Than A Year.
This is one of the common possible reason of an account being frozen. Unused account normally leads to many complications that banks need to comply with. If the account owner is dead, the bank account has to put down or closed. if there is no claimant, the balance in the account goes to RBI DEAF fund.
There may be many reasons of account getting dormant or inoperative. Deceased account holder, reallocation of address, permanently shifted abroad and unable to get back home-town, etc. These are some of the common reasons.
When you stop using account for a year, it becomes dormant which literally requires activation of account . when you are unable to reach out to the bank, the problem starts and your bank account might get freezed until you meet the concerned official.
Relying only on online and digital transactions-ATM, may lead to inoperative account. The system does not count those transaction done online. Though you prefer doing it online, visit once a while to your bank and let them do few transactions over the counter. Submit documents in time to avoid account freezing.