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  • What is Inactive or Dormant Bank Account?

    It is a common phenomenon to hold many savings accounts in our name, but not being able to keep it active. It isn’t simple to keep a tab of multiple savings bank accounts. It increases confusion and mismanagement. If you don’t pay heed to managing your inactive bank account it can cost you money. This article explains that how can you reactivate your dormant bank account as it hasn’t been operated for 2 years, and why does the bank render them inactive.

    Definition of a Dormant / Inactive Bank Account?

    If you SB or current account hasn’t witnessed any transactions(credit/debit except interest credited the bank, deduction of service charges, for more than 1 year, the account is rendered inactive. On exceeding 2 years, the account is declared dormant/inoperative.

    What Kind of Transactions Should I do to Keep Saving Bank Account Active?

    Any customer induced transaction is enough for this purpose. Like credit or debit transactions done by the account holder in this account, keeps it active. Some of them have been listed below -

    Outward bill

    Inward bill

    Transactions through cheque.

    Deposit of cash

    Deposit through cheque

    Cash withdrawal or deposit via ATM.

    Internet banking transaction

    Crediting interest earned mandate on Fixed deposit to Savings Bank Account

    Why Does the Bank Render a Saving Bank Account Dormant?

    The bank takes this step of making your saving bank account inactive to ensure security and protecting your money from the risk of fraudulent transactions. this is for both internal employees and external customers. Once an account is not used for a long time since years, bank employees can easily get a sample of the account holder’s past signatures. With this it becomes extremely easy for them to access the deposited money by using withdrawal slips. Hence, to save your account from such frauds, banks group it into a single cluster and maintain details of inactive accounts in a separate ledger.

    What are The Consequences of Having an Inactive or Dormant SB Account?

    Account Holder of an inactive account can’t perform many operations. A cheque book be cannot be issued to you, the restrictions on the account operations become tighter. Requests for the following can’t be filed -

    • Change of address
    • Signature modification
    • Addition or deleting a joint holder
    • Renewal of ATM/debit card
    • No cash withdrawal from an ATM
    • No transactions either through internet banking or a branch of the bank

    What is The Difference Between a Dormant Account and Frozen Bank Account?

    They are two separate things. On freezing a bank account, there can be no transaction through the same till further notice. Funds cannot be debited from the account, even on the specified date. If the account holder has issues some cheques earlier, the payments for the same will be stalled, but for any deposits in the row, that can be credited. Reserve Bank of India, Securities and Exchange Board of India, courts and income-tax authorities have the authority to get a bank account to freeze.

    An inoperative bank account entails a penalty, which depends on the concerned bank’s policy. The penalty holds true only during the period when the account is non-operational. This charge is levied on an annually and isn’t a lot. Also, customers are penalized if the minimum account balance is not maintained. The charges may differ from bank to bank.

    For HDFC Bank, the average minimum balance of an account in an urban/metro is Rs 10,000. It is Rs. 5000 for accounts held in rural or semi-urban area is Rs 5,000. On not maintaining this minimum balance, a charge of Rs 750 is levied, quarterly basis.These charges are deducted directly from the account.

    However, interest is still credited to your saving account on a regular basis even after the account is declared inactive or dormant.

    Will the Account Holder Get any Notification When his Bank Account is Made Dormant?

    Yes, usually banks intimate the customer two to three months prior to making the account inactive.

    How to Reactivate a Dormant Bank Account?

    Dormant bank account can be reactivated for you to start operating it or closing it. The reactivation process differs from one bank to another. Usually, the account gets activated within 24 hours. For this purpose an account holder needs to make a transaction by cheque or ATM. If one has other active accounts, he can send a secured message to the bank from his Personal Internet Banking ID. This needs to come with an instruction debit at least a rupee from this account to the other.

    For reactivation of an inactive account, submit a duly filled application to the bank justifying the reason for your absence. Banks are very strict and methodical when it comes to verifying customer credentials before reactivation of accounts. The account holder needs to be physically present themselves with a valid address proof and valid identity proof. He needs to take these to the nearest branch, to duly fulfil the Know Your Customer (KYC) formalities. As per RBI guidelines, charges for activating dormant account cannot be levied.

    What Are the Preventive Methods that Can be Taken to Protect Your Account from Becoming Inactive or Dormant?

    There are many. Keep using your account before it turns inactive or dormant. Carry out a transaction, Withdraw cash, transfer funds through any of the banking channels, or make a cheque payment to ensure that your account remains active. Carry out a transaction once in awhile, at least once a year, in all your accounts if you want to escape bearing the penalty or having to run to

    If you have shifted cities or countries, you can use net banking to transfer small sums between two accounts. If the account is no longer useful, best is to close the account.

    Even Mandate for Crediting Interest from FD to Saving Bank Account is a Customer Induced Transaction?

    There may be instances where the customer has given a mandate for crediting the interest on Fixed Deposit account to the Savings Bank account and there are no other operations in the Savings Bank account. Since the interest on Fixed Deposit account is credited to the Savings Bank accounts as per the mandate of the customer, the same should be treated as a customer induced transaction. As such, the account should be treated as operative account as long as the interest on Fixed Deposit account is credited to the Savings Bank account. The Savings Bank account can be treated as inoperative account only after two years from the date of the last credit entry of the interest on fixed deposit account.

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