Has your bank account gone dormant? Here are 4 ways to reactivate it (2024)

When a bank account remains inactive for over two years, it is typically categorized as inoperative or dormant. This classification arises because financial institutions are required to maintain records for all accounts, and managing unused accounts can become cumbersome and costly.

Activate your dormant account in time

If you possess an inoperative account, you can typically reactivate it by initiating a deposit or by getting in touch with your bank. Nonetheless, in cases where an account has remained dormant for more than a decade, the bank might have transferred the remaining balance or unclaimed deposits to the Reserve Bank of India's Depositor Education and Awareness Fund. To claim the funds from this fund, you will need to establish contact with the RBI.

Several public sector banks in India now require both savings and current accounts to be classified as inoperative if there have been no transactions in the account for a period exceeding two years, aligning with the directives set forth by the RBI.

An inoperative account is defined as an account that has not experienced any customer-initiated transactions (whether debit or credit) for a continuous two-year period, with transactions like interest credited by the bank or service charges imposed by the bank being excluded from this criterion. 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. If the account holder does not revive the account within this stipulated period, the bank reserves the right to impose additional fees or potentially even close the account.

Below are several factors that lead banks to designate accounts as inoperative:

• For the purpose of mitigating the risk of fraud and other financial crimes.
• In adherence to RBI regulations.
• To enhance operational efficiency.
• With the aim of cost reduction.

Update KYC details regularly

Numerous banks are urging customers to activate their accounts and update their KYC details if their accounts have remained inactive for over 24 months. This precautionary step is taken to minimize the risk of fraud and other financial crimes. Furthermore, banks must adhere to the Know Your Customer (KYC) directives established by the RBI. These guidelines necessitate that banks verify their customers' identities and maintain up-to-date customer records.

Bank customers can benefit a lot by activating their accounts and ensuring that their KYC is up to date:

• They can access all the features and services of their bank accounts seamlessly.
• They can conduct transactions without any inconvenience.
• They will have enhanced protection against fraud and other financial crimes.

Informing customers about inactivity in their accounts

Banks commonly notify their customers about inactive accounts through a two-stage process. These include:

Stage 1

• The bank will dispatch a notification to the customer, alerting them to the account's inactivity over a specific timeframe, typically 12 months. This notice will also provide instructions on reactivating the account, such as through a transaction or by reaching out to the bank.
• Should the customer fail to reactivate their account within a designated timeframe, usually around 90 days, the account will progress to Stage 2.

Stage 2

• Subsequently, the bank will issue a conclusive notice to the customer, notifying them that their account faces closure unless reactivated within a specified timeframe, usually around 30 days.
• In the event the customer does not reactivate their account within this duration, the bank will proceed to close the account and transfer the remaining balance to a suspense account.

The customer retains the option to reclaim the balance from the suspense account by reaching out to the bank and furnishing valid proof of their identity.

It's crucial to acknowledge that the exact procedure for communicating with customers regarding inactive accounts can differ among different banks. Therefore, customers are encouraged to directly contact their respective banks for more detailed information.

How to avoid your account getting dormant?

If you possess a public sector bank account that has remained dormant for some time, it is advisable to verify its status and conduct a transaction, if needed, to maintain its active status. This can be accomplished by either visiting your bank branch or utilizing the bank's mobile banking or Internet banking application

To prevent your account from becoming inoperative, consider the following tips:

• Ensure at least one transaction in your account every two years.
• Establish a standing instruction for periodic transfers from another account to your bank account.
• Connect your bank account to a mobile wallet or UPI app and make regular payments.
• If you anticipate prolonged inactivity, notify your bank and request it to maintain its active status.

In most cases, banks do not impose fees for reactivating dormant accounts. However, banks may levy fees for various services linked to dormant accounts, including furnishing account statements or transferring the remaining balance to a suspense account.

Nevertheless, neglecting messages from the bank regarding KYC updates or reactivating transactions can lead to unnecessary inconvenience when conducting transactions. For instance, the bank might either freeze the account temporarily or opt to close it entirely. This action could pose challenges for the customer in terms of accessing their funds and potentially impact their credit score.

If you possess an inactive account, it's advisable to promptly reach out to your bank to reactivate it and update your KYC information. This proactive step will help you steer clear of any unwelcome inconveniences and guarantee ready access to your funds as and when required.

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Published: 16 Oct 2023, 08:47 AM IST