Financial regulators are guided by a simple mandate: protect depositors, policyholders, and investors. The RBI, SEBI, and IRDAI have steadily tightened rules to safeguard the system. Yet, a paradox has taken root. In trying to protect financial assets and prevent money laundering, the system is increasingly making the assets inaccessible to their rightful owners.

This is not a marginal inefficiency; it is a structural failure of regulatory design. India today has over Rs 2 lakh crore locked in dormant bank accounts, unclaimed insurance proceeds, idle mutual fund folios, and other financial instruments. But this headline number understates the problem. Beneath it lies a much larger pool of inactive accounts, funds that are neither used nor formally classified as unclaimed.

The modern financial system runs on KYC norms designed to prevent money laundering and illicit activity. Over time, these norms have become more rigorous and more intrusive. That trajectory may be understandable. What is not is their indiscriminate application. A small savings account with a few thousand rupees is often subjected to the same procedural intensity as a high-risk account. This is not risk-based regulation; it is compliance maximalism.

In a country that has built a sophisticated digital identity stack with Aadhaar, PAN, tax records, and banking trails, KYC updation still routinely requires customers to fill forms, submit documents repeatedly, and navigate fragmented processes. Even where digital options exist, they are inconsistent. The system demands modern compliance through outdated processes.

There is also a more fundamental question........

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