Dormant Account

The English Language describes dormancy as a state of inactiveness. A Dormant Account is a banking term that refers to an account of a customer which was without any activity for a period of two years, other than posting of the interest and/or service charges. Once an account is classified as Dormant, the customer will be restricted from using his/her ATM Card or transact in the account without reactivating the same. The option is employed by the banks in spite of the apparent inconvenience a customer may face with the object of safeguarding the account from any instances of fraudulence. This article looks at the various norms specified for such accounts.

Exemptions to the Norm

An account will remain operative if it has credits with respect to interest on a term deposit with the bank. This is because such credits are based on the mandate of the customer. Likewise, any

ECS (Electronic Clearing Service) credits such as dividends or ECS debits such as payment of utility bills will help keep an account operative. Customers having two accounts are provided with the option of mandating a single debit from an account for crediting the same to another account and make these accounts operative. Banks would continuously credit any interest on balance to the accounts, whether or not a given account is dormant.

Intimation of Dormancy

Banks are required to intimate the customer before three months of classifying the account as dormant. Prior to this, the former must have an annual review of all Savings Bank/Current Accounts. Based on such review, account holders who haven’t transacted for a long time will be asked to activate the account through prescribed means.

Inactive vs Dormant Account

A bank account of a customer will be classed as inactive if he/she hasn’t performed any transactions for more than a year, and as dormant for two years of lack of activity. Account holders whose accounts have been tagged as inactive would be prohibited from making requests for debit card or cheque books and wouldn’t be facilitated to use the Internet banking facility. Dormant Account holders wouldn't be allowed to change their address, contact number, email address, and the performance of transactions through ATMs, internet and phone banking. Also, the restrictions meant for inactive accounts will apply to the latter. The banks are neither allowed to levy a charge for the reactivation of accounts nor impose charges for dormancy. If a customer faces anything in violation of these norms, he/she may approach the

banking ombudsman.

Reactivation of Accounts

The Reserve Bank of India has ordered banks to exercise due diligence while verifying the credentials of the customer for account reactivation. Most banks require the account holders to make themselves present along with the essential documents to the nearest branch. The documentary requirements, as well as the process of reactivation, differs from one bank to another. On a general note, banks may require a written application from the applicant, duly signed by all the joint holders (if any), for reactivation.

Tax Requirement

Taxpayers are required to provide details of savings and current accounts while filing their

income-tax returns. The regulation also applies to all dormant and inactive accounts, except those which haven't been operational for more than three years.

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Frequently Asked Questions

Common questions about Dormant Account Regulations: Safeguarding Your Finances.

A dormant account is a banking term that refers to a customer's account that has been inactive for a period of two years or more, except for the posting of interest and/or service charges. Banks classify such accounts as dormant to safeguard them from potential fraudulent activities.

An account will remain operative if it has credits with respect to interest on a term deposit with the bank, as these credits are based on the customer's mandate. Additionally, any ECS (Electronic Clearing Service) credits or debits, such as dividends or utility bill payments, will keep the account operative.

Yes, banks are required to intimate the customer at least three months before classifying the account as dormant. They must conduct an annual review of all savings and current accounts and ask customers who haven't transacted for a long time to activate their accounts through prescribed means.

An account is considered inactive if the customer hasn't performed any transactions for more than a year, and it becomes dormant after two years of inactivity. Dormant account holders face more restrictions compared to those with inactive accounts.

Dormant account holders are not allowed to change their address, contact number, email address, or perform transactions through ATMs, internet, or phone banking. They also face the same restrictions as inactive accounts, such as being prohibited from requesting debit cards or cheque books and using internet banking facilities.

No, banks are not allowed to levy a charge for the reactivation of accounts, nor can they impose charges for dormancy. If a customer faces any violation of these norms, they may approach the banking ombudsman.

The process of reactivation differs from one bank to another, but generally, banks require account holders to visit the nearest branch in person with essential documents. They may need to submit a written application, duly signed by all joint holders (if any), for reactivation.

Yes, taxpayers are required to provide details of their savings and current accounts, including dormant and inactive accounts, except for those that haven't been operational for more than three years.

The Reserve Bank of India has ordered banks to exercise due diligence while verifying the credentials of the customer for account reactivation. They must follow strict procedures to ensure the account holder's identity and prevent any potential fraudulent activities.

No, dormant account holders are not allowed to perform transactions through ATMs, internet, or phone banking. The account needs to be reactivated by following the bank's prescribed process before any transactions can be made.