INACTIVE AND DORMANT ACCOUNT
If you have a current or a savings bank account and have not done any transactions through it for more than 12 months, then it will be classified as an inactive account. And if you don’t do any transactions from a bank account for 24 months, then it will be classified as dormant.
Remember when banks use the term “transaction’, only transactions initiated by you (transaction through debit card, net banking) or a third party are taken into account.
Bank-initiated transactions, such as interest on savings balance or penalties and service charges debited by your bank are not considered while classifying your account as inactive or dormant accounts. However, credit of interest, earned from fixed deposits, is considered as customer-induced transaction and helps keep the account active.
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.
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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.
Restrictions on inactive and dormant accounts
Once your account is tagged as inactive, you won’t be able to request for a debit card or cheque book, use Internet banking or get user identity (ID) and password.
And when it becomes a dormant account, besides the restrictions applicable on an inactive account, you won’t be allowed to change your address, contact number, email address, and do transactions through ATMs, Internet and phone banking.
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.
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.
How to reactivate your bank account?
Reactivating your accounts is very simple. You can simply make a deposit or withdrawal transaction to reactivate your inactive bank account. To reactivate your dormant account, submit a written request for reactivation at your home branch. Remember that your bank cannot charge you for reactivating the account.
As inactive or dormant bank accounts are a result of not closing the accounts, the first step towards avoiding the problem of inactive or dormant bank accounts is to close the accounts that you do not need. In case you wish to continue with a lesser used bank account, try to make one deposit or withdrawal every year.
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.
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 –
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