Understanding Bank Account Inactivity and Dormancy
In the realm of banking, a bank account can become inactive or dormant if there are no transactions for a certain period. This guide will help you understand what happens when your account becomes inactive, how to make it operational again, and what happens to the funds that remain after an extended period of inactivity.
When Does a Bank Account Become Inactive?
A bank account is considered inactive or dormant when there has been no debit or credit for a continuous period of 90 days. This period is not time-continuous but spans over a calendar period, taking into account different days in each month.
According to the norms set by banks, if an account is not operated for a year, it is considered a dormant account. If the account remains inactive for two years, it is deemed to be in an inoperative or inactive state.
Activating a Dormant Bank Account
To reactivate a dormant bank account, you need to visit the branch in person. You will need to carry self-attested copies of your Aadhar card and PAN card as part of the KYC (Know Your Customer) process. There is also a nominal fee of Rs.100 to re-activate the account. The account holder must personally attend to rule out the possibility of the account being unclaimed due to the owner's death.
What Happens to Funds in an Inactive Account?
After the account remains inactive for more than 10 years (120 months), the balance is transferred to a special account created by the Reserve Bank of India (RBI) called DEAF (Depositor Education and Awareness Fund). This fund is utilized for educational programs aimed at spreading financial awareness among the public.
However, even after these years, if the customer comes forward to claim their account, the balance will still be refunded to them.
FAQs and Additional Information
What is the DEAF?
The DEAF, or Depositor Education and Awareness Fund, is a special account maintained by the Reserve Bank of India for educational and awareness purposes. It receives funds from inactive bank accounts and uses them to finance programs that educate the public about financial literacy and responsible banking practices.
Activities Needed for an Account to Stay Operational
To avoid being classified as inoperative, a savings account must have at least one customer-initiated transaction every year. This could be as simple as a withdrawal, deposit, or a mobile banking transaction.
KYC Compliance and New Deposits
New deposits or transactions in a previously dormant account may also require fresh KYC compliance to restart the account.
Conclusion
Understanding the process of bank account inactivity and dormancy is crucial for any customer. It ensures that you are aware of the status of your account and how to reactivate it to maintain its operational status. Knowledge about 'A', 'B', and 'C' of a topic provides a more comprehensive understanding and can help prevent unexpected complications.