Many times, people stop using their bank accounts. This might have happened due to various reasons, such as Using other bank accounts as primary accounts, the unavailability of ATM, Cheque book or Internet banking etc.
In such cases, those unused accounts go Dormant.
In this article, we will understand the complete details related to the Dormant Account.
What are dormant accounts? Impacts of a dormant account, and we will also understand the process and documents to reactivate the dormant account.
Table of Contents
What are Dormant Accounts?
Dormant account meaning : A savings or current account comes under the category of dormant if there have been no customer-induced transactions in the account for over a period of two years.
This guideline is set by the Reserve Bank of India and is applicable to all Banks.
Before tagging any account as dormant account,Bank follows two steps
1. If one year is completed without any customer-induced transactions, The bank sends information to the customer to make any financial transactions to keep the account active. This information can be sent through Email, SMS, or a physical letter.
2. If the account does not get activated in the second year either, then the bank is required to inform the customer three months prior to the account being classified as dormant.
3. If the account has been continuously dormant for more than 10 years, then, as per the regulations of the Reserve Bank of India, Banks are required to transfer all such funds to the RBI Deaf Account. (Reserve Bank of India: Depositors Education and Awareness Fund)
Link of Reserve Bank India about Dormant Account Rules https://www.rbi.org.in/commonperson/English/Scripts/Notification.aspx?Id=1364
Impact of Dormant Account | What happens if the account got Dormant?
- Restricted services : Once an account goes dormant certain services like changes of residence, renewal of ATM or debit cards, addition or removal of joint account holders, change of signature, and transactions through internet banking or at a bank branch are restricted by the Bank.
- Risk of fraud : When an account remains inactive for a long time, there is a chance that someone with malicious intent could take advantage of the account holder’s absence and commit fraud. Moreover, if the account holder’s contact details have changed, there’s a possibility that important communications from the bank may not reach them.
Banks pause transactions and account activity to prevent risks and fraud.
- Funds transferred to RBI Deaf accounts: If the account does not get activated for more than 10 years, the bank will transfer the funds to the RBI Deaf account. This policy is made by the Reserve Bank of India. To get this fund back, is a separate process which takes longer time.
Process to reactivate the Dormant Account :
- To reactivate the dormant account customer needs to visit the branch by self.
- Submit the application for account reactivation along with fresh KYC documents of the account holder. (PAN card ,Adhar card/ Driving License / Passport etc)
- Post verification of documents and proper due diligence, the Bank will start the activation process.
- Once your account will get activated, you need to complete at least one financial transaction in your account. You can do any of these financial transaction
Deposit money through cheque, Deposit / Withdraw cash.
- To use your account regularly, you can apply for a fresh ATM, Chequebook and also you can start Internet banking.
Sample application to reactivate your Dormant Account
To
The Branch Manager
__________ Bank Name
__________ Branch Name
__________Address
__________City
Subject : Application for reactivation of our account
Dear Sir
I Mr./ Mrs. _____________ has a Savings account in your Branch.
Account number : _________________
Due to mention reason for non usage (e.g Using other account/being out of city / Moved to another location etc) my account went dormant.
Now I want to use the account. I request you to kindly reactivate my account.
I am submitting my KYC documents along with this letter.
Kindly do the needful.
Thanks & Regards
Signature of account holder(s)
Your Name:
A/c no :
Mobile no. :
Address :
FAQ- Dormant Account
How long can a bank account be dormant?
A bank account is considered dormant if there have been no customer-induced transactions for over a period of two years, according to the Reserve Bank of India’s guidelines.
What happens if you have a dormant account?
If your account becomes dormant, certain services like changes of residence, renewal of ATM or debit cards, and transactions through internet banking or at a bank branch are restricted. There’s also a risk of fraud, as malicious person might take advantage of the account holder’s absence.
Can I activate my dormant account?
Yes, you can reactivate your dormant account by visiting the branch in person. You’ll need to submit an application for account reactivation along with fresh KYC documents. After verification and due diligence, the bank will initiate the activation process.
Will a dormant account close automatically?
No dormant account does not closed automatically. To avoid the potential risk with Dormant Account, Reserve Bank of India has introduced DEAF Account (Depositors Education and Awareness Fund ) , Any funds associated with a bank account that have been inactive for more than ten years would be transferred by the bank to the RBI Deaf Fund.
Can I withdraw money from a dormant account?
You can withdraw money from Dormant account only after reactivation of the account.
How do I remove dormancy from my account?
To remove dormancy from your account, you need to visit the branch in person, submit an application for account reactivation, and provide fresh KYC documents. After verification, the bank will initiate the activation process.
Will I receive interest in my dormant savings account?
Yes, Dormant saving bank accounts get interest like other savings accounts.