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Changing jobs, moving to a new city or country, changing business requirements or simply altering banking preferences because of new offers – there are a multitude of reasons why customers fail to maintain regular transactions on a certain account. However accounts once abandoned do not fall off the face of the banking map. In fact, there are various consequences and effects when customers leave their current and savings accounts unattended for extended periods of time. The good news is, reviving a dormant account can be a fairly simple process. In the following sections we will discuss how you can go about doing it.
Dormant Bank Accounts and the Consequences
According to guidelines issued by the Reserve Bank of India in its Master Circular on Customer Service in Banks – 2015, only current or savings bank accounts can become dormant after a pre determined period of time. If there have been no transactions through the account in question for a period of at least 12 months, then the account qualifies as inactive. If no financial transactions are conducted through the account for a period of two consecutive years, the account becomes dormant. Only credits or debits other than interest credited by bank qualify as a transaction.
While dormant accounts do not incur any monetary penalties as per recent RBI guidelines, there are several operational inconveniences for account holders. Once an account is dormant, customers cannot undertake simple functions such as:
- Renewal of ATM/debit cards
- Cash withdrawal from an ATM
- Carry out transactions online or through phone banking
- Carry out transactions in person at bank branch
- Request for address/phone number or any other change
- Request issuance of cheque books or passbooks
How and Why Banks Classify Accounts as Dormant
As per recent guidelines by the RBI, the country’s apex financial institution has mandated that banks should be more proactive about tracing owners and account holders of unmaintained accounts. In as far back as 2011,RBI had reported that there were 10 million dormant current and savings accounts within Indian’s banking system with total unclaimed deposits of approximately Rs. 1700 crores. In 2015,the World Bank weighed in on the dormant accounts issue with a report revealed that India accounts for 195 millionadults with dormant bank accounts out of the 460 million recorded across the world. Financial institutions in India believe these accounts to be at high risk with respect to suspicious activities and other types of fraud. In fact a clause in Section 24 of the RBI Master Circular states that the intention of closely monitoring an account can reduce chances of suspicious activity. Further from a wider perspective, liquid cash stuck in dormant accounts is money that is not circulating in the economy.
However, there is an easy fix to the problem of unmaintained inactive/dormant accounts. Most banks require customers to submit an application to revive an account. However, with the advent and increased acceptance of internet banking,the process has become even simpler.However prevention is better than cure. The following is a list of measures a customer should take to ensure all their accounts remain active.
Keeping an Account Active
Simple credit or debit transactions at least once every year is proof enough that a customer wants their account to remain active. However there are some other measures an account holder can take to keeping a savings account active:
- Internet banking transaction
- Withdrawals through cheque
- Deposits through cheque
- Inward bill
- Outward bill
- Deposit of cash
- Automatic Credit of fixed deposit and recurring deposit interestinto savings account
- Cash withdrawal or deposit via an ATM
Reactivating a Dormant Account
The process of reactivating a dormant account may vary slightly from one bank to another. However, it is similar to opening a new bank account as you have to complete all relevant KYC formalities. The first step is to file an application stating the reasons why the account holder left their account inactive. Then once the reactivation process starts, the customer has to visit the nearest branch with copies of valid ID and address proof as well as the originals for verification.
When these are submitted, the Know Your Customer (KYC) formalities need to be fulfilled as per the bank’s requirements. Banks have also instated an online process for retail customers, so that the procedure is made simpler through internet banking.It should be kept in mind that the process of reactivating a bank account required banks to perform due diligence as part of the overall procedure. Therefore, it is always in your interest to maintain a minimum level of activity in your account in order to prevent long periods of inactivity and its associated problems.