Banking Loophole or Systemic Failure? Money can be credited to Dormant/Frozen accounts, but reversal is a nightmare.

[User_3bc0e28a]

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User_3bc0e28a
PARTICIPANT
May 2, 2026 at 5:03 pm

Hi everyone,

I want to highlight a serious flaw in our banking system and get your advice.

**The Situation:** I recently made an erroneous UPI transfer (wrong mobile number) to an account in a major nationalized bank. I immediately reported it to my bank.

**The Loophole:** I found out that the beneficiary account has been **Dormant/Inactive for years** and is also under a **Lien (Frozen)**.

* **The Problem:** Even though the account is inactive and frozen, the banking system allowed the money to be credited into it without any hurdles.
* **The Trap:** When I asked for a reversal, the beneficiary bank refused, saying they need a “Debit Mandate” or consent from the account holder.
* **The Irony:** The bank itself admits the customer is **untraceable** and hasn’t visited the branch in years.

**My Questions to the Community:**

1. Why does the banking system allow credits into Inactive/Frozen accounts if they can’t process a reversal for a proven error?
2. If the bank admits the account is dormant and the customer is missing, why isn’t a “Technical Reversal” mandatory when the remitter bank confirms the error?
3. Has anyone else faced this? What are the legal or RBI-specific grounds to challenge this “consent” requirement for a dormant account?

I feel like my money is being held hostage by a systemic loophole. Looking forward to your insights on whether I should escalate this to the Consumer Court or if there’s an RBI circular that addresses this specific paradox.

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