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What is Dormant Bank Account


An account that has been in active for a period of two years will be termed as Dormant Account. Only recently the dormant account period was 6 months and in the year 2009 RBI mandated that Dormant period should now be extended to 2 years. That means in case of lack of any activity in the account the account will first turn into inactive and subsequently into a dormant one. Even more restrictions apply in dormant bank account. No transactions are allowed in the dormant account.

To make it active one must visit bank with all proofs like ID proof, address proof etc. Also KYC norms will be enforced, so PAN card is also necessary.

What transactions are ignored or considered for making account dormant?


Ignored:

  1. Savings account interest credit.
  2. Banking errors or corrections.
  3. penalty on your account like not maintaining AQB.
  4. Other fixed annual charges like demat charges deduction.



Considered:

  1. Any transaction initiated by any person in your account (Credit or Debit cheque book charges etc.
  2. Fixed deposit interest credit in your account. It'd be better to have a FD of 5 years and get interest added into your account regularly to escape from dormant account penalty.



What one loss when the account becomes dormant?

  1. Keep in mind rules keep changing, previously no interest was paid on the account balance one your account was declared dormant, currently yes your all interest gets added but saving account interest rate is at reduced rate.
  2. Banks can charge you to make your account active now. As per RBI 2009 circular it’s clear that there is no "must" but only "should" advisory is there which is not compulsory for banks to follow.
  3. The postdated cheques will bounce affecting the credit history of the customer.
  4. All credits like dividends from stocks mutual fund may not be credited to the account.
  5. The ATM or Debit Cards will be cancelled.
  6. All the funds in the account will be locked up and one will not be able to use them.
  7. In case the account was below AQB when it became dormant the bank will continue to debit charges for non-maintaining of AQB every quarter, finally leading to closure of the account without any notice.

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