Have a
dormant bank account
? The
Reserve Bank of India
(RBI) has rules for
inactive bank accounts
. Here's an overview of what this means and how to avoid penalties.
Recognising dormancy
A bank account, whether it's a savings or current account, becomes dormant if there are no
customer-initiated transactions
, both financial and non-financial, for a period exceeding two years.
Non-financial transactions
include actions like changing transaction limits, requesting cheque books or cards, or simply checking the balance.
Notification from the bank
Banks are obligated to inform customers about the status of their account if no transactions occur for a year. Notifications can be sent via letters, emails, or SMS. These alerts serve as a warning, indicating that the account will be classified as 'inoperative' if no activity takes place within the next year.
Consequences of dormancy
Once an account becomes dormant, account holders lose the ability to perform any transactions, whether financial or non-financial. However, the balance in the account remains safe and continues to accrue interest at regular intervals, states an ET report.
Reactivating a dormant bank account
The Reserve Bank of India has simplified the process of activating a dormant account. You can reactivate it by re-submitting identification documents. For joint accounts, both holders need to provide their photographs, PAN cards, proof of address, and proof of identity. Once submitted, the bank will inform you via SMS and email that your account is active again based on the KYC documents provided.
Charges and penalties
There are no fees for reactivating dormant accounts, and banks cannot impose penalties for not maintaining minimum balances in such accounts. It's important to note that banks must still pay interest on savings accounts regularly, regardless of whether the account is active or not.
Handling unclaimed deposits
Money left untouched in a bank account for ten years or longer, or funds remaining unclaimed for the same period, are termed unclaimed deposits. After this time, banks transfer these funds to the Depositor Education & Awareness (DEA) Fund overseen by the RBI.
Recovering unclaimed deposits
The money in the deposit account will not be forfeited. Bank branches provide separate forms for reclaiming unclaimed deposits. There are specific procedures for the depositor or their nominee/legal heir to follow, especially in the event of the depositor's death. Banks keep a record of
inoperative accounts
and unclaimed deposits to facilitate this process.
Keeping accounts active
To keep your account active and avoid any issues, it's important for account holders to make transactions—either financial or non-financial—regularly, at least once a year. If interest from fixed deposits is credited to your savings account, even if you don't use it for transactions, it will still be considered active.
With inputs from Centre for Investment Education and Learning content which appeared in Economic Times
FAQs
A dormant bank account becomes inactive if there are no customer-initiated transactions for more than two years. Reactivating the account is a simplified process that involves re-submitting identification documents. Unclaimed deposits are transferred to the Depositor Education & Awareness Fund overseen by the RBI.
What are the rules for dormant bank account in India? ›
A savings/ current account will be treated as inoperative if there are no customer induced transactions in the account for a period of over two years, reads the RBI notification. The Reserve Bank of India (RBI) has released a circular that issued fresh instructions relating to inoperative accounts.
How to activate dormant account in boi? ›
In order to change the status of the account from "Dormant to Active," the account holder must personally deliver a letter to the bank together with the passbook for savings banks or the cheque book for current accounts and state the reasons why they haven't used the account in the past.
How many days to reactivate a dormant account? ›
When an account is categorized as inoperative, the bank will issue a notice to the account holder, apprising them of the account's status. The account holder will have the opportunity to reactivate the account by conducting a transaction within a specified timeframe, usually around 90 days.
How long does a dormant bank account stay open? ›
If you don't use your account for a long period of time the bank or building society may declare it dormant, but the length of time before this happens will vary between institutions. It could be as little as 12 months for a current account, three years for a savings account, or in some cases up to 15 years.
How long is a bank account considered dormant? ›
State law can dictate when a bank account is considered to be dormant and what happens to the money in it. A typical time frame is three to five years, though again, the rules can depend on where you live.
What are the rules for dormant account activation in RBI? ›
The banks shall process requests for activation of inoperative account/ unclaimed deposits within three working days from the receipt of the complete application. Interest on savings accounts shall be credited on a regular basis irrespective of the fact that the account is in operation or not.
Are there any charges to activate a dormant account? ›
There are no fees for reactivating dormant accounts, and banks cannot impose penalties for not maintaining minimum balances in such accounts. It's important to note that banks must still pay interest on savings accounts regularly, regardless of whether the account is active or not.
How to activate an inactive Indian bank account? ›
Closed bank account can not be reopened. However dormant or inoperative account can be activated by submitting KYC and one in person debit transaction.
Can I withdraw money from a dormant account? ›
A bank account's holder is unable to conduct transactions once it is rendered inactive. However, dormant accounts are free of statute limitations. This means the beneficiary may withdraw funds at any time. You will need to activate your account to make a transaction.
During this period, the account remains open and accessible to the account holder, but no deposits, withdrawals, or other transactions occur. Inactivity may result from various reasons including the account holder's oversight, changing financial priorities, or simply not needing to use the account for a period of time.
What happens if I transfer money to a dormant account? ›
Generally, your funds remain safe even if your account becomes dormant. However, there may be restrictions on accessing the account until it is reactivated. It's crucial to contact your bank to understand their policies regarding dormant accounts.
What documents do I need to reactivate a dormant bank account? ›
You must submit a written application to the bank. For joint accounts, signatures of all accountholders will be needed, irrespective of a single or joint operating mode. You will have to submit your KYC (Know Your Customer) documents. These will include address proof, PAN Card, and identity documents.
What are the rules for dormant bank accounts? ›
What Does a Dormant Account Mean for You? If you ignore your savings bank account and let it become dormant, you'll face limitations. You won't be able to write checks, renew your ATM/debit card, change your address on file, or perform any transactions through ATM, internet banking , or phone banking.
Do banks charge for dormant accounts? ›
Banks and other financial institutions can charge dormancy fees if a customer's account has been inactive for a certain period of time. Dormancy fees are no longer allowed on credit card accounts.
What happens to money if account is dormant? ›
Key Takeaways. A dormant account is an account that has had no financial activity for a long period of time, except for the posting of interest. After the dormancy period, which varies by state, dormant accounts become the unclaimed property of the state.
What happens if a bank account is dormant for 10 years? ›
Money left untouched in a bank account for ten years or longer, or funds remaining unclaimed for the same period, are termed unclaimed deposits. After this time, banks transfer these funds to the Depositor Education & Awareness (DEA) Fund overseen by the RBI. The money in the deposit account will not be forfeited.
Is it mandatory to close dormant account? ›
Can I Close a Dormant Account? You can close a dormant account, and you should do so. Otherwise, the money will slowly get eaten away by fees, including dormant account fees. To do this, contact the financial institution and ask it to transfer the remaining balance in the account to another current account.
Is there any penalty for dormant account? ›
Does a bank levy a charge for reactivation of dormant accounts? No. Banks are not supposed to charge for reactivation of dormant accounts.
