Freezing of demat accounts for KYC not uploaded with KRA

Central Depository Services Limited, vide Circular No. CDSL/OPS/DP/POLCY/2026/234 dated April 02, 2026, has announced an important update regarding Freezing of demat accounts for KYC not uploaded with KRA.

Key Details of the Update –
• This communiqué refers to Securities and Exchange Board of India Circular no. SEBI/HO/MIRSD/FATF/P/CIR/2023/0144 dated August 11, 2023 on simplification of KYC process and rationalisation of the risk management framework at KYC Registration Agencies (KRAs), as well as CDSL communique no. CDSL/OPS/DP/POLCY/2026/67 dated January 30, 2026 regarding extension for upload of KYC records with KRA.
• Central Depository Services Limited has reiterated that Beneficial Owners whose KYC attributes / details are not verified by the KRAs shall not be permitted to carry out any transactions until such verification is completed.
• The communiqué specifically directs that where, in a demat account / BO ID, the KYC details of any account holder are not verified by KRAs by April 30, 2026, such BO IDs must be frozen for both debit and credit by the Depository Participants.
• The prescribed freeze reason code for such action is “27 – Account holder related – KYC non-compliant”. This creates a specific operational coding requirement for Depository Participants while implementing the freeze.
• The measure is intended to ensure that demat accounts with unverified KYC details do not continue to remain operational for transactions, thereby strengthening KYC enforcement and regulatory control within the depository system.
• The communiqué also states that any non-compliance with this requirement shall be viewed seriously, indicating possible regulatory or supervisory consequences for failure by Depository Participants to carry out the mandated freezing action.
• For any issues relating to client KRA status, Depository Participants have been asked to directly contact the respective KRA(s).

Actions if Any –
• Depository Participants must identify all demat accounts / BO IDs where the KYC details of any account holder remain unverified by KRAs by the specified date.
• Such BO IDs must be frozen for both debit and credit using freeze reason code “27 – Account holder related – KYC non-compliant”.
• Depository Participants are required to take note of the communiqué and ensure compliance with the freezing requirement.

Compliance Deadline –
All demat accounts / BO IDs in which the KYC details of any account holder are not verified by KRAs must be frozen for both debit and credit by April 30, 2026. This deadline applies to action by Depository Participants using freeze reason code “27 – Account holder related – KYC non-compliant.”