Since there is no restriction on how many bank accounts a person can operate, many people have more than one bank account. Many of these accounts become dormant accounts because no transactions are conducted on them for a long time. The Indian central bank has issued a circular that allows banks to consider these accounts as non-operative and therefore dormant. It is nice to know the procedures involved in declaring an account as dormant to avoid later problems.
Accounts that are not used for transactions for 12 months are called inactive accounts. Before the account is declared thus, the account holder would receive a notification in this regard from the bank. Such accounts cannot request new cheque books or debit cards etc and mobile and Internet banking would be deactivated in such accounts.
When the account has not been used for 24 months, it becomes an inoperative account or a dormant account. ATM transactions would be blocked in such accounts in addition to other digital services. In addition, phone banking and profile updates would also be cancelled in such accounts. Customers should be notified three months before the account is made dormant. If the account holder can present a reason, which the bank considers as reasonable, the account can be continued in a viable state for one more year.
There are also clear norms on which type of transactions would be considered to declare an account as dormant or non-dormant. Direct or indirect deposits and withdrawals are considered as transactions that can prevent accounts from being tagged as dormant. Same is the case with fixed deposit transfers and credit of dividends. Charges levied by banks and interest deposits cannot be considered as transactions.
The RBI does not allow banks to withdraw money from dormant accountants because they do not have the minimum balance in them. Similarly, fees should not be charged for making accounts dormant.
Banks have to transfer balances in an account to a new account in case a customer is not able to use the old account because he or she has moved away. Banks also need to enquire about customers, their details and heirs in case nothing is heard from the customer when informed that their account is being made dormant. Banks also need to use all resources and facilities available to try and contact the customer before making an account dormant.