When UPI Transactions Lead To 19-Month Debit Freeze: What Should You Do

A recent post on the public forum Reddit has highlighted a long-running debit freeze on a savings account after usual, routine Unified Payments Interface (UPI) activity. The account belonged to a student and was put on a debit freeze after a number of incoming UPI transactions were flagged by the bank's internal systems. The freeze was imposed for close to 19 months and blocked access to funds worth about Rs 16,000.

For a student, the blocked amount was financially significant and resulted in dependence on short-term borrowing for routine expenses.

The account holder has stated that the freeze was imposed without any prior notice. No written explanation, review timeline or formal communication was furnished at the time. The freeze limited debit transactions but allowed credits, effectively restricting funds.

What Happened During The Freeze

During the 19-month period, the account holder reportedly went to the branch more than ten times. Each time, there was a set reply that the matter was being dealt with by a central team and the branch had no authority to sort it out.

There was no documented escalation process that was relayed to the customer. No written communication was provided for the reason for the freeze, documentation requirements or expected date for resolution. At one point, a bank employee is said to have suggested not to use the funds.

Such debit freezes are usually associated with anti-money laundering and Know Your Customer (KYC) monitoring, where transaction patterns do not match the risk profile of the customer.

Steps That Finally Led To Resolution

After almost 18 months, the account holder approached the nodal officer of the bank, raised this issue and lodged a complaint under the Reserve Bank of India's (RBI's) Integrated Ombudsman Scheme.

Only after the complaint reached the regulator did the bank seek the source of funds documentation. Once verification was done, the debit freeze was removed, and access to the blocked Rs 16,000 was allowed.

Post-Unfreeze Complications

After restoring account operations, the branch sent out an email that the complaint had been withdrawn, indicating that it needed to be processed for completion of the unfreeze process.

Subsequently, this email was cited in the RBI proceedings to suggest that the entire complaint had been withdrawn, including concerns related to service deficiency. The bank's response to the regulator also failed to clearly point out the total duration of the 19-month freeze. In spite of this, the delay was acknowledged by the regulator.

RBI Ombudsman Outcome

RBI had ordered to make a payment of Rs 5,000 as compensation. The complaint was closed based on Clause 14 (9) (a) of the Ombudsman framework, which applies in cases of settlement of a complaint on intervention.

Proceedings before the Ombudsman are summarised in nature. Once compensation is made and access is restored, the cases are usually closed and are not subject to appeal under the RBI framework. There was no detailed look at whether a 19-month freeze was proportionate to the risk identified.

What Customers Can Do In Similar Situations

Customers who are subject to debit freezes when using UPI or other transactions can take the following steps:

To begin with, seek written communication from the bank firmly stating the reason for the freeze and the documents required for review.

Second, escalate the issue internally to the nodal or grievance officer of the bank, in case branch visits fail to result in action.

Third, file a complaint under the RBI Integrated Ombudsman Scheme, in case the matter is not resolved within the prescribed timeframe (within 30 days) by the bank.

Fourth, be cautious in sending emails to withdraw complaints, especially if sent under pressure, as these may have an impact on further proceedings.

In cases involving bigger compensation or accountability for more than service restoration, consumer courts remain as a separate legal option.