Dormant Bank Account or Inoperative Bank Account

Now-a-days many people receive mail from their banks stating that their bank account will become ‘Inoperative Bank Account/ Dormant Bank Account’ for non-operation of Saving as well as Current Account? Many people got confused or stressed because of such mails, hence today I am writing this article to help my readers to understand and face this issue confidently.

What is meant by inoperative or Dormant Bank Account?

As per paragraph 24.2 (ix) of the Master Circular no 59/2015-16 on ‘Customer Services in Banks’ dated 01 July, 2015, a savings as well as current account should be treated as inoperative / dormant if there are no transactions in the account for over a period of two years. The accounts which have not been operated upon over a period of two years should be segregated and maintained in separate ledgers.

What are all transactions considered for classifying account as inoperative or Dormant Bank Account?

For the purpose of classifying an account as ‘inoperative/ Dormant’ both the type of transactions i.e. debit as well as credit transactions induced at the instance of customers as well as third party should be considered. However, the service charges levied by the bank or interest credited by the bank should not be considered.

What is the Process followed by the bank before declaring any Account as inoperative or Dormant?

1. Banks should make an annual review of accounts in which there are no operations (i.e. no credit or debit other than crediting of periodic interest or debiting of service charges) for more than one year.

2. The banks may approach the customers and inform them in writing that there has been no operation in their accounts and ascertain the reasons for the same.

3. In case the non-operation in the account is due to shifting of the customers from the locality, they may be asked to provide the details of the new bank accounts to which the balance in the existing account could be transferred.

4. If the letters are returned undelivered, they may immediately be put on enquiry to find out the whereabouts of customers or their legal heirs in case they are deceased.

5. In case the whereabouts of the customers are not traceable, banks should consider contacting the persons who had introduced the account holder. They could also consider contacting the employer / or any other person whose details are available with them.

6. They could also consider contacting the account holder telephonically in case his telephone number / Cell number has been furnished to the bank. In case of Non Resident accounts, the bank may also contact the account holders through email and obtain their confirmation of the details of the account.

7. After duly following above process, if there are no transaction in the account for over a period of two years then that account will be declared as inoperative or dormant Bank account

Some Important Points regarding inoperative or Dormant Bank Account

1. The segregation of the inoperative or dormant accounts is from the point of view of reducing risk of frauds etc. However, the customer should not be inconvenienced in any way, just because his account has been rendered inoperative. The classification is there only to bring to the attention of dealing staff, the increased risk in the account. The transaction may be monitored at a higher level both from the point of view of preventing fraud and making a Suspicious Transactions Report. However, the entire process should remain un-noticeable by the customer.

2. Operation in such inoperative or dormant accounts may be allowed after due diligence as per risk category of the customer. Due diligence would mean ensuring genuineness of the transaction, verification of the signature and identity, etc. However, it has to be ensured that the customer is not inconvenienced as a result of extra care taken by the bank.

3. Banks are also advised to ensure that the amounts lying in inoperative accounts ledger are properly audited by the internal auditors / statutory auditors of the bank.

4. Interest on savings bank accounts should be credited on a regular basis whether the account is operative or not. If a Fixed Deposit Receipt matures and proceeds are unpaid, the amount left unclaimed with the bank will attract savings bank rate of interest.

How to Activate an Inoperative or Dormant Bank Account?

As per Notification No 173 dated 06 December, 2016, banks are mandated to exercise due diligence before they reactivate a dormant account and sudden requests for withdrawal from such accounts are bound to be treated with caution.

RBI has not prescribed any standard process for activating inoperative or dormant bank accounts. Therefore, every bank has followed its own process to activate a bank account.

Following are some of the common steps which is followed by most of the banks:

• You will have to file a written application to reactivate your dormant account.
• You will have to submit your KYC documents alongside your reactivation application.
• Make a small deposit to keep your account safe from going dormant again.

To Conclude this article, I would like to say that be very cautious while handling your bank account since it is one of the important assets in your life.