Running many banks accounts can be overwhelming specially for multi – business owners that some you don’t know that one or two of your accounts have been declared dormant due to no activity in the account.
For instance a lecturer, ran out of money in his salary account, so he has to make withdraw from his other savings account, but his withdrawal request rejected by one ATM to other he got furious that he contacted the bank’s customer care. He was told that his account had become dormant due to prolonged non-operation.
Quickly i will share some things you have to understand about active and dormant accounts.
Let’s dive in
How long does it take for account to be declared inactive or dormant?
When you don’t transact through a bank account for more than 12 months, that account gets classified as an inactive account. If that particular account does not witness any transaction for another 12 months, it is further reclassified as dormant account.
Remember when banks use the term “transaction’, only transactions initiated by you (transaction through debit card, net banking) or a third party are taken into account. Bank-initiated transactions, such as interest on savings balance or penalties and service charges debited by your bank are not considered while classifying your account as inactive or dormant accounts. However, credit of interest, earned from fixed deposits, is considered as customer-induced transaction and helps keep the account active.
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Restrictions on inactive and dormant accounts
The restrictions on inactive/dormant account vary from bank to bank. While some banks impose restrictions on net banking, phone-banking and ATM transactions, others may even restrict cheque transactions. For example, some banks do not allow ATM, phone banking and net banking transactions in its dormant accounts. However, some don’t allow cheque book request, ATM/Debit card transactions, issue or renewal of ATM/Debit card, address change request, internet banking and cheque clearing transactions in addition to phone banking, ATM and internet banking transactions.
Why you need to reclassify your inactive account
The main purpose of reclassifying the accounts is to reduce the risk of fraud in your account. By reclassifying the accounts, banks warn their staff about the potential risk involved and carry out due diligence before allowing any fresh transaction through them.
Communication from bank before reclassification
Banks are required to inform you at least three months before the reclassification of your account. They are also required to inform you about the procedure for re-activation of your account. If you chose to reply to the bank and provide the reasons for the non-operation of your account, your account will still continue to be considered as an operative account for another year. However, if you still don’t transact through your account during the extended period, your account will be classified as dormant/inoperative account at the end of the extended period. However, you will continue to receive interest on your savings account balance even after your account gets reclassified as a dormant or inactive account.
How to reactivate your bank account?
Reactivating your accounts is very simple. You can simply make a deposit or withdrawal transaction to reactivate your inactive bank account. To reactivate your dormant account, submit a written request for reactivation at your home branch. Remember that your bank cannot charge you for reactivating the account.
As inactive or dormant bank accounts are a result of not closing the accounts, the first step towards avoiding the problem of inactive or dormant bank accounts is to close the accounts that you do not need. In case you wish to continue with a lesser used bank account, try to make one deposit or withdrawal every year.
According to www.livemint.com on a report on inactive and dormant account, if you have a current or a savings bank account and have not done any transactions through it for some months, then it will be classified as an inactive account. And if you don’t do any transactions from a bank account for some months, then it will be classified as dormant. An account becomes dormant if a customer does not initiate transactions such as withdrawal of cash at a branch or automated teller machine (ATM), payment by cheque, transfer of funds through Internet banking, phone banking or ATMs.
System generated transactions, such as interest credit, are not considered valid. However, if you get dividend on shares or the proceeds of your fixed deposit in your savings account, then it will be considered as a customer induced transaction. Hence, the account will be treated as operative as long as the dividend or FD proceeds is credited to bank account. It will be treated as inoperative only after two years from the date of the last credit entry of dividend or FD, provided there is no other customer induced transaction.
Once your account is tagged as inactive, you won’t be able to request for a debit card or cheque book, use Internet banking or get user identity and password. And when it becomes a dormant account, besides the restrictions applicable on an inactive account, you won’t be allowed to change your address, contact number, email address, and do transactions through ATMs, Internet and phone banking.
What you should know
One can activate an inactive bank account by doing basic banking activities such as cash withdrawal or deposit, funds transfer or bill payment. Some banks give you the option to request for activation of your account through Internet banking. You can even call the customer care or contact the bank branch. In case of a dormant account, you may have to submit a written request along with identity proof. Your signature may also be verified to activate the account