What happens to a dormant, inactive account?

THE PUNCH Newspaper

How many bank accounts do you hold? How about that one account that you opened while in college and have not bothered to check again? Has it been two years since you withdrew from or deposited money in that account?

You may be surprised to find that you are not able to transact in that account anymore. This is because that account of yours is now designated as a dormant.

Fortunately, it is quite straightforward to get these accounts back in active state. This post covers dormant accounts in detail as well as lists steps to reactivate them, according to fintistic.com.

How and why does a bank account become dormant?

If you have not done any transactions in your account for some months, it will be classified as inactive. If you don’t do any transaction for further months, it will become dormant.

Effectively, a savings account is considered dormant after many months of inactivity where no valid transactions happen.

The transactions that are considered valid are customer or third party initiated and include both debit and credit transactions.

Some examples are withdrawal of cash, payment through cheque or internet banking, use of phone banking or ATMs among others. Any dividends received or EMIs will be considered as valid transactions. Any interest credited on fixed deposits with the same bank are considered valid transactions too.

Any transactions that are bank-initiated are not considered valid for the purpose of determining the dormant status of your savings account. These include automatic interest payments on your savings balance or penalty deductions or service charges that may be levied from time to time.

Essentially, if there is no self or third party transaction for a period of two years on a trot, your account will be marked as dormant.

The main intent behind this rule is to reduce the risk of fraudulent transactions in what are essentially ignored savings accounts.

Banks are advised to exercise diligence and bank staff will pay attention if there is a sudden request for a withdrawal from an inactive or a dormant account.

What restrictions will you face with dormant accounts?

Most banks will impose restrictions on ATM, net-baning and phone-banking transactions. Some will extend these restrictions to cheque transactions as well. Others won’t allow change of address, issue or renewal of a debit card, cheque book requests etc.

In most cases, you can expect following restrictions on an Inactive accounts:

No issue of a fresh cheque book
No new debit card
No access to internet banking

Once it becomes dormant, you can expect following additional restrictions:

No withdrawal of money from an ATM or a bank branch or through phone banking
No debit card renewal
No modification of signatures
Not able to change address or email ID or contact number
No addition or deletion of a joint holder

Not being able to get what is essentially is your money on time may be frustrating and it is best to prevent your account from going dormant or inactive in first place itself.

How to prevent your account from becoming dormant?

Well, the easiest way to ensure that the account does not become inactive is to make a small transaction regularly. This may be a small deposit or a withdrawal and can be done easily through net banking.

One quick mental tip to ensure that your accounts never become dormant is to earmark different bank accounts for different purposes. For example, use one account for bill payments, other for investments, third for credit card payments and so on.

This way, all of your accounts will have regular transactions and will never become inactive.

Further, the root cause of accounts going dormant is typically one having too many bank accounts. If that is the case with you, it is best to close the accounts that you don’t need.

These days it is really easy to open a new savings account and it does not make sense to continue to retain an account that you know you won’t use for an extended period of time.

So identify the accounts that you don’t need and file an application with the respective bank to close them.

How to reactivate your account?

If your account is in inactive’ status, all you need to do is to do a small transaction via an ATM or through a cheque. This transaction can be made in some months of inactivity.

However, if your account has already become dormant (if it has been inactive for many months), you won’t be able to do any such transaction. Don’t worry though, your money is still available to you once your reactivate your account.

Banks are mandated to exercise due diligence before they reactivate a dormant account and sudden requests for withdrawal from such accounts are bound to be treated with caution.

But, you will find that the process to reactivate these accounts is fairly straightforward.

Since banks are instructed to exercise due diligence, the actual process of reactivation will differ from bank to bank.

Most banks, none-the-less, will have following steps:

Submit a written Reactivation Application or fill a form

You will have to file a written application to reactive your dormant account.

This application should contain your reason of not transacting and should be addressed to the branch manager of the respective bank.

If your account is a joint account, all the account holders will have to sign this application.

You may also have to fill a reactivation form

Make a small deposit

Once you complete the reactivation procedure, your bank account should typically be reactivated in 24 hours.

As soon as this reactivation happens, make a small deposit to keep your account from going dormant again. Some banks may ask for this deposit alongside your reactivation request itself.

Do note that for reactivating your dormant account, you will probably have to visit your bank branch in person. Some banks do offer online reactivation but that is an exception more than a rule.


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