Freezing of accounts means you will not be able to undertake any transaction in your banking account until further notice. All payment and transactions will be stopped even cheques issued by the holder earlier.
Regulators such as the Reserve Bank of India, Securities and Exchange Board of India, income-tax authorities or courts have rights to order a freeze bank accounts.
Here are 7 reasons when the accounts are freezed:
1) Unpaid private loans
If you have not paid your loans despite several reminders, your account could be froze.
2) Tax dues
Classic examples have been Sahara and Kingfisher Airlines, where accounts have been frozen for non payment of tax dues.
3) Unpaid money to a organisation/individual.
4) Suspicious activities in the account
5) Use of the account for illegal activities
6) Money laundering
7) Terrorist financing
More recently, Kingfisher accounts were frozen as the Airline failed to clear dues of Rs 40 crore to the tax department.
Even the Sahara Group accounts were frozen by the market regulator the Securities Exchange Board of India (SEBI) as per an order by the Honourable Supreme Court.
You have to have a favourable court verdict in order to unfreeze and secure your bank account.
Can banks freeze accounts?
If the banks feel that the transaction in the account is suspicious they can freeze an account. However, they have to send notice to the holder before freezing.
An unusual transaction could in ivolve an illegitamate business transaction is savings account as prohibited under RBI rules.
In fact, once it is frozen for legitimate reasons getting the account in order is going to be a long and tedious process.
What you should do if bank freeze your acccount?
Banks are within their rights to freeze accounts, if they are operating for illegal purposes. If you feel that none of the above points are applicable to you and the bank has unjustly frozen your account, you can tak to them. Most likely they will see reason. However, in case they do not, you can approach the Reserve Bank of India t resolve matters. It is most unlikely that the matter would not be resolved.
In case, you do not want to go through the long and cumbersome process, it's best you open a new account.