Understanding Dormant Bank Accounts: Causes, Consequences, and Activation

Bank accounts can become dormant if they have no transactions such as withdrawals, deposits, or transfers for an extended period. This varies by institution and jurisdiction, with a typical period ranging from six months to several years. When an account is classified as dormant, the bank may charge fees or impose restrictions, potentially leading to account closure and the transfer of remaining balances to the state as unclaimed property.

Causes of Dormant Bank Accounts

There are various reasons why a bank account might become dormant. These include:

Owner has moved away and forgotten about it Owner has passed away Wealthy parents opening accounts for children but not contributing Accounts left unattended due to lack of interest or awareness

For example, a parent might open an account for their child in hopes of saving for the child's future but might not contribute the desired amount. Over time, the account might be forgotten until the Treasurer’s Office publishes a list of unclaimed funds or a family member searches online using the child's last name.

Consequences of Dormant Bank Accounts

Once an account is declared dormant, the bank may:

Charge fees Impose restrictions on account usage Close the account and transfer the remaining balance to the state as unclaimed property

To avoid these consequences, it is advisable to regularly check with your bank for their specific policies regarding dormant accounts and to ensure that your account remains active.

Activating a Dormant Bank Account

If your account is classified as dormant, there are several steps you can take to activate it:

Make a debit transaction at least once every six months to prevent the account from going dormant. Initiate an inward transfer by any party to show that the account is operational. Visit the bank and withdraw money through a cheque or deposit cash/cheque to reactivate the account. Submit the required KYC details such as Aadhaar and PAN card to ensure account compliance.

Customer-induced transactions, such as those through your account, cheques, cash or cheque deposits, ATM withdrawals or deposits, internet transactions, inward/outward bill transactions, ECS (Electronic Clearing System) and EFT (Electronic Funds Transfer) transactions, are essential in keeping the account active.

It is important to note that even a single credit or debit transaction every six months is sufficient to prevent the account from becoming dormant. If you find your account has been declared dormant, you can take the necessary steps to reactivate it based on the above-mentioned methods.

Frequently Asked Questions

What happens if an account becomes dormant?

If an account becomes dormant, the bank may charge fees, impose restrictions, or close the account and transfer the remaining balance to the state as unclaimed property.

Can an account become dormant if there is one transaction?

No, an account remains active if there is at least one transaction (debit or credit) every six months. Even if the account is dormant, a single transaction is sufficient to bring it back to an active status.

How can I ensure my account remains active?

To ensure your account remains active, make at least one transaction every six months. This can be through a debit or credit, such as a cheque withdrawal, cash deposit, ATM transaction, or internet banking transaction.