A dormant bank account is one that has no activity for over 2 years. Banks do this to mitigate fraud, comply with regulations, and reduce costs. You can reactivate your account by making a transaction or contacting your bank. Banks have regulations in place to activate dormant accounts.
After enough time has passed the account can be deemed unclaimed property. State law can dictate when a bank account is considered to be dormant and what happens to the money in it. A typical time frame is three to five years, though again, the rules can depend on where you live.
Reactivation process: To reactivate an inactive account, you can simply resume banking activities like making deposits, withdrawals or transfers. Some banks let you reactivate inactive accounts online. For dormant accounts, you must request reactivation from the bank and give identity proof.
One of the easiest ways to reclaim funds from your dormant account is by contacting your bank or building society account provider. You'll usually be asked to provide as much information as possible about the account, including: The account number. The name of the account holder.
Do all banks have to stipulate the same time period for classification of an account as dormant? Yes, because RBI has stipulated that a savings / current account will be classified as dormant / inoperative if there are no transactions in the account for over a period of two years.
A dormant account with a very small balance may simply evaporate, reaching a zero balance due to monthly bank fees that exceed any interest paid. If not, the balance is turned over to the state, which will return it to the rightful owner upon request.
If the account stays inactive for more than 2 years, the bank renders the account status dormant. An account is also made dormant if the account holder doesn't withdraw any funds for 24 months. However, dormant accounts are free of statute limitations. This means the beneficiary may withdraw funds at any time.
The account owner can request the bank to reactivate a dormant account. First, the bank would ask them to present several documents, including account number, identification, and other proofs. Then, the person usually has to do some transactions to ensure that the account is reactivated.
The bank may be trying to alert you that your account is inactive. If the account remains inactive, it may be classified as abandoned, and your funds may be turned over to the state. This practice may also be referred to as escheatment.
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.
If there have been no transactions in a savings or current account for more than two years, the account will be considered inactive or dormant. The accounts that have not been used for more than two years will be noted by banks and kept in different ledgers.
If you have a current or savings account with us that you haven't used for some time, we might need to close it to help protect you from potential fraud, such as identify theft. We'll always try to contact you before we do this.
Activate Dormant Account
To activate an account that has not been operated for more than two years and has become dormant, you need to visit your branch in person.
While the exact timeframes and policies can vary among financial institutions, generally, an account is considered inactive after 12 to 24 months of inactivity, while dormancy typically sets in after a longer period, often exceeding two to five years.
Inactive accounts that haven't been accessed for extended periods are more likely to be compromised due to password reuse and lack of multifactor authentication.
If an account becomes dormant, you won't be able to issue cheques, renew your ATM/ Debit Card, request to change address or carry out any transaction through ATM, Internet Banking or Phone Banking.
A dormant account has not been used in the past 90 days. To use a dormant account, you first must activate it by answering the question correctly. You can then use it to make purchases or transfers simultaneously as you would normally. You can also use a dormant account to receive payments.
Once an account becomes inactive or dormant, certain consequences follow. Transactions that are automatically generated by the banking system, such as interest credits, will no longer apply to these accounts.
If your account has a zero balance when it's closed, it won't have an effect on your score. However, if you close the account when it has a negative balance, the bank may either send your account to a collection agency or come to a default arrangement with you.
Here's What Happens When You Don't Make Any Bank Account Transactions for More Than a Year. Your bank account could become dormant if you make no transactions for a period of time. At that point, your bank might charge you an inactivity fee or close your account.
It becomes inoperative after 24 months of inactivity
Furthermore, if the account remains dormant for 10 years, then its balance and interest are routed to RBI's Depositors' Education and Awareness Fund.
After a specified amount of time that varies by state, banks must escheat the funds of inactive accounts, meaning they're required to turn the funds over to the state. Dormancy fees are designed to limit this from happening by incentivizing customers to keep their accounts active.
According to rules, if a bank account remains inactive for 10 years, money gets transferred to the RBI's Depositor Education and Awareness (DEA) Fund every month. The important point to note here is the unclaimed money earns interest at rates specified by the RBI, not at the rate at which the deposit was made.
The best way to avoid an inactive fee is to conduct a transaction, such as a deposit or trade, or to have an automatic bill payment or direct deposit go through the account. One other option is to close the account.