A situation may arise when the bank does not permit any transaction in your saving account. It is the account which was opened but never operated for a long time. It’s a dormant account.
Only the saving or current account becomes dormant.
Even if the account is declared as dormant account, Bank keeps on crediting interest on the balance in the account. RBI has directed the banks not to levy any penalty for non-maintenance of minimum balance in the dormant account. However, the bank may impose restrictions like not allowing payment of cheque /withdrawal etc. from a dormant account.
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Banks consider the following transactions to determine whether the account is dormant or not:
- Self withdrawal or withdrawal through ATM
- Depositing to the account
- Cheque payment
- Transfer of funds to and from the account
- Interest earned on fixed deposits and credited to the account
- Payment of EMI
These are all customer mandated/customer induced transactions.
Bank induced transactions like standard interest credit in the saving account does not fall in this category.
An account becomes an inactive account if it is not operated for one year. Later it is classified as dormant account if no transaction takes place for another year.
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Dissemination of information by the banks:
Banks do inform the customer before classifying the account as a dormant account. It is done in two stages:
- If for one year there is no transaction in the account, the account is declared inactive. Bank asks the customer to make a debit or credit entry in the account.
- If no transaction is made in the account for another year, a communication is sent three months before classifying it as a dormant account.
How to activate a dormant account
For an inactive account, a simple debit/credit transaction will activate the account. The facility to reactivate such account might be available through Internet Banking also.
For a dormant account, an application is made to the bank for reactivation. There are no charges for reactivating the account although banks levy charges on the dormant account.
A written request is made by applying to the branch. The application cites the reasons for not operating the account for such a long time. In case of a joint account, both the account holders sign the application.
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For some banks, the account holder doesn’t need to visit the branch for activating a dormant account. But some banks insist upon a physical visit by the customer.
The documents required for KYC compliances are submitted afresh. A customer needs to provide ID proof, Address proof, PAN card and old cheque book and Debit card. The signatures are also verified at this stage.
The customer deposits some amount after reactivation or along with the documents for reactivation.
It is better to make some deposits per year or link the account directly for credit card payment or EMIs etc. so that the account remains alive and active.
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