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.
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.