There is a looming crisis in the banking sector — the re-KYC of hundreds of millions of account holders under the Pradhan Mantri Jan Dhan Yojana (PMJDY). Launched with much fanfare in Prime Minister Narendra Modi’s first tenure in 2014 to accelerate financial inclusion, the PMJDY has as many as 530 million accounts — over one-third of India’s population — and has crossed several milestones over the years.

On the very first day, 15 million accounts were opened, over 30 million in a month and 75 million by January 26, 2015. Stiff targets had to be met in an extraordinarily short time — the usual template of ambitious projects. Given the pressure to deliver, there would certainly have been lapses in the initial KYC process. After a decade, those lapses have come back to haunt the banking sector as well as the beneficiaries. And it is already showing in the number of inoperative accounts, which stands at 110 million or 21%.

The more worrying aspect is the increasing number of accounts getting frozen, implying people being denied access to their savings, due to KYC issues. As field studies by Jean Drèze in four villages in Jharkhand has shown, 69% of households have been denied access to at least one bank account. What makes these Jan Dhan accounts important are three things: Direct benefit transfer (DBT) from government, insurance, and credit. Of course, the blame game has begun. Customers blame banks, banks blame regulations, and the Reserve Bank of India blames the rising number of “mule” accounts.

The last one is an extremely serious issue. With the rise of the fintech industry and digital banking, the number of people using the Unified Payments Interface route to commit frauds has been increasing at a fast clip. Last year, Paytm Payments Bank was shut down due to money laundering by some its customers. And for many years, scamsters have “rented out” bank accounts to invest in initial public offerings or stock markets. Last month, the home minister said that the government had identified as many as 1.9 million mule accounts and prevented suspicious transactions worth `2,038 crore.

Obviously, the threat of account misuse is real. But so is the need to ensure that the poor, dependent on government doles, are not denied their dues. It’s not that the government is unaware of the challenges. In November, M Nagaraju, secretary of the department of financial services, in a meeting with stakeholders, emphasised the importance of using all available means such as fingerprints, facial recognition, and others across various channels for re-KYC. He also urged banks to replicate the zeal they demonstrated during the PMJDY launch, and complete the process in a timely manner, even if it meant deploying additional staff. But putting pressure on the banking system, once again, is not the solution.

The government needs to take the responsibility this time. For example, create a separate depository or data base of bank accounts dependent on welfare schemes. These accounts have to be monitored by a separate body for usage, require minimum KYC (Aadhaar-enabled), and must allow only government-to-beneficiary transfers. This separation will serve two purposes — take the pressure away from banks, especially their rural branches, and reduce their exploitation as mule accounts. Managing 530 million bank accounts is a humungous task. But even if 0.5% to 1% of beneficiaries are denied their dues, it will be grossly unfair. With great decisions comes greater responsibility.