What is dormant / inactive saving bank account – Often we have to open multiple saving bank accounts with different banks due to various reasons. Some of reasons may be – Change of Employer (to receive salary in different bank), for deposit of account payee cheques, to avail loan, for fund transfer etc. But to maintain and operate all accounts is difficult so some bank accounts are left unused after the purpose is accomplished.
Such accounts which are left unused for a specified period of time are classified as inactive account / dormant account by banks as per regulatory guidelines. Here in this article, we will read about what is dormant account / inactive account and how to reactivate a dormant account.
Also Read : 10 Common Reasons for dishonour of Cheque
Dormant Account / Inactive Account
If a savings or current account has not had any transactions/activity for over one year, the account is rendered inactive by the bank. Once this inactivity exceeds two years, banks declare such an account as dormant or inoperative.
Banks generally intimate the customer 2-3 months prior of classifying the account as inactive.
The main purpose to classify the accounts as Dormant / inactive is to ensure security and reduce the risk of fraud in such accounts.
As per RBI guidelines, account transactions include debit or credit transactions such as:
- Cash withdrawal and deposit at bank branches or ATMs
- Inward and outward bill payments
- Cheque transactions – payments, withdrawals, deposits
- Funds transfer through phone banking, internet banking or ATMs
- Internet banking transactions
- Dividend credits paid into the savings account
- Fixed Deposit (FD) interest credits made into savings accounts.
In short, any customer initiated transaction is included in the above list while System-generated transactions/Bank-initiated transactions such as interest credit and service charges deduction are not included in the above list of transactions.
Penalty levied on Dormant Accounts
The account holder will have to pay charges – which could be high – and he will not be able to put through any transaction through ATM, Internet banking or Phone banking as the bank would deactivate such services in the interests of the bank and the account holder.
How to reactivate a Dormant Account
A Dormant bank account can be reactivated by simply making a deposit or withdrawal transaction. To reactivate a dormant account, account holder should visit home branch and provide a written request for reactivation of the account. Bank may ask for fresh KYC documentation and hence, one should carry along with an identity proof, address proof and a recent photograph.
How to Prevent an account from being Dormant
To avoid the hassles of dealing with an inactive or dormant account and bearing applicable penalties, it is best to carry out transactions once in a while, ideally once every 6 months or at the very least once in a year, for all the savings or current accounts that you currently have. Such transactions include regularly conducting basic banking transactions like withdrawal or deposit of cash, funds transfer through any banking channel, cheque and bill payments, etc.
In the bank account is no longer needed, best is to close such account.
The level of restrictions put on dormant account differs from bank to bank. And also the reactivation process of dormant account may vary so get in touch with your bank branch or customer care for more assistance.