Fraud Concerns Rise Over Jan Dhan Accounts: Government Advises Banks to Close Inactive Accounts

Amid rising concerns of financial fraud, the government has advised public sector banks to take stringent action against inactive Jan Dhan accounts, which may be used for illegal financial activities. This move comes as part of a larger strategy to safeguard India's financial inclusion mission from misuse and fraudulent practices.

Why Are Jan Dhan Accounts Under Scrutiny?

According to sources familiar with the matter, many dormant Jan Dhan accounts are suspected of being used for money laundering or fraudulent fund transfers. These accounts, often opened as part of the Pradhan Mantri Jan Dhan Yojana (PMJDY), were initially aimed at offering basic banking services to the unbanked population, especially in rural areas.

However, with millions of these accounts lying idle, there is a growing fear that fraudsters may be exploiting them as conduits to move or legitimize illicit funds.

To curb this, banks have been asked to shut down accounts that show no recent activity, unless beneficiaries come forward to update their Know Your Customer (KYC) details and show interest in reactivating their accounts.

What Steps Are Banks Taking?

In response to the advisory, public sector banks are initiating re-verification processes, primarily through KYC updates, to assess the legitimacy and usage of Jan Dhan accounts. If an account holder does not respond or fails to comply with the verification, the account may be closed permanently.

Bankers believe that this process is essential to prevent the accounts from becoming soft targets for fraud rings and money mules. Re-activating accounts will be allowed only after thorough due diligence, thereby limiting the scope for abuse.

RBI’s Role and the ‘Mule Hunter’ Initiative

The Reserve Bank of India (RBI) has been closely monitoring this issue. Over the past few years, the central bank has taken several steps to address the fraud risks associated with Jan Dhan accounts. One of the key initiatives is the ‘Mule Hunter’ program, which focuses on identifying and tracking suspicious transactions and mule accounts—those that are operated by individuals on behalf of others for illegal fund transfers.

This proactive monitoring framework has been helping financial institutions flag unusual patterns and mitigate risks before they escalate into large-scale fraud.

A Decade of Financial Inclusion—and New Challenges

Launched in 2014, the Pradhan Mantri Jan Dhan Yojana recently completed 10 years in 2024. It has successfully brought over 53 crore beneficiaries into the formal banking system, primarily from rural and underserved areas. The scheme played a transformative role in deepening financial inclusion across India.

However, with this mass expansion comes a new set of challenges—ensuring security, monitoring misuse, and maintaining active engagement with account holders.

Final Word

The government's directive to close inactive Jan Dhan accounts is a preventive measure aimed at curbing fraud and safeguarding the integrity of one of India’s most ambitious financial inclusion programs. While the scheme has empowered millions with access to banking, digital payments, and direct benefit transfers, vigilance is key to ensuring that this empowerment is not exploited for unlawful purposes.

Going forward, maintaining updated KYC, encouraging responsible account usage, and investing in digital financial literacy will be crucial to preserving the success and sustainability of Jan Dhan Yojana.

Stay informed as further updates on banking regulations and fraud prevention measures are expected in the coming months.