With the ease of opening a bank account, people have many savings account options to explore, and easy account opening makes account opening like a cakewalk.
However, managing numerous accounts can pose a significant challenge, leading to the possibility of some of these accounts becoming dormant.
In this article, we will discuss What Is a Dormant Account, how a Dormant Account Works, the difference Between an Inactive and Dormant Bank Account, and much more.
What Is a Dormant Account?
A Dormant Account refers to a bank or financial account that has had minimal or no activity over an extended period. In this state, the account remains open but experiences infrequent transactions, such as deposits or withdrawals.
Dormancy can occur due to various reasons, including a lack of use, change in financial priorities, or oversight. Financial institutions often classify accounts as dormant when there’s a prolonged period without customer-initiated transactions.
While the account is dormant, it may still accrue nominal fees. Reactivating a dormant account usually involves contacting the bank or performing a customer-initiated transaction to bring the account back to an active status.
How a Dormant Account Works?
When an account is not being used for a long period, then the account’s status changes from active to inactive account. The inactive account when further kept unused, the status of the account is changed to the Dormant.
As per RBI, account holders have the provision to claim the funds held in their accounts for a minimum period of 10 years.
Beyond this period, the bank is obligated to transfer the credit from the dormant account to the Depositor Education and Awareness Fund Scheme, which is overseen and maintained by the Reserve Bank of India (RBI).
Difference Between an Inactive and Dormant Bank Account
Here’s a simple table differentiating between an Inactive and a Dormant Bank Account-
Inactive Bank Account | Dormant Bank Account |
An account with no transactions credit or debit is termed an inactive bank account. | An account with an extended period of inactivity or even longer period of inactivity than the inactive bank account is called a dormant account |
No transactions | no activity for an extended period. |
Shorter duration of inactivity i.e., more than 12 months | Longer duration of inactivity, more than 24 months |
May incur regular account maintenance fees | May accrue additional dormant account fees |
Typically involves initiating any account transaction like debit or credit | May require specific reactivation procedures set by the bank |
Lower risk as the account is still considered active | Higher risk as it’s closer to being classified as unclaimed property |
No specific notification | Banks often notify account holders before declaring an account dormant |
How Can I Claim My Money from a Dormant Account?
In the case of the dormant account, you can claim back the money in your account by following a process, which is as follows-
- Start by reaching out to the bank where the dormant account is held and Inquire about reactivating or claiming funds from a dormant account
- Banks typically require proof of identity to ensure the rightful owner is claiming the funds like a passport, Aadhaar card, PAN Card, etc.
- Some banks may have specific reactivation forms that need to be filled out. These forms often include details about the account, the reason for dormancy, and the intended transactions.
- After filling out the form, you’ll receive the cheque from the bank for your remaining bank balance or your dormant account will be converted into an active account.
FAQ
A Dormant Account refers to a bank account with no activity over an extended period. It’s not closed but experiences infrequent transactions which makes the account domant.
An account may become dormant due to prolonged inactivity, typically with no deposits, withdrawals, or other customer-initiated transactions.
Accessing funds in a dormant account usually requires reactivation. Some banks automatically change the status to active if the transaction is initiated.
Yes, banks typically impose a penalty on the account holder for not maintaining his/her account. To change the status of the account to active from dormant, you’ll have to pay dormant account fees.
As per the RBI guidelines, the account becomes dormant when there is no account activity for at least 2 years. So, it is advised to make some transactions to ensure your account does not become dormant.
The banks will hold your dormant account along with the funds themselves for at least 10 years, however, if the dormant account remains unclaimed or dissolved in between then the account will be transferred to the Depositor Education and Awareness Fund Scheme which is managed by the RBI.
Banks often notify account holders before declaring an account dormant. These notifications may include information on how to prevent dormancy and reactivate the account.