What Happens To Your Bank Account After Two Years Of Inactivity

A small transaction or auto-payment can keep your account active.

It’s easy to lose track of an old bank account, especially after changing jobs and opening a new salary account. Over time, the unused account may remain idle without any transactions. As per the Reserve Bank of India (RBI) guidelines, if there is no customer-initiated activity in a savings or current account for two years, the account is classified as “dormant” or “inoperative.”

Banks generally send a reminder after 12 months of inactivity, alerting customers that their account may soon be classified as dormant. Once an account becomes dormant, certain restrictions come into effect, and several banking services remain unavailable until the account is reactivated by the customer.

What Happens When An Account Goes Dormant

A dormant account cannot be used for transactions, including deposits, withdrawals, ATM use, debit card payments, or non-financial updates such as changing your address. “A dormant account is not just a regulatory classification; it’s a signal of disengagement,” explained Reynold D’Souza, president and head-branch banking, North & TASC business, Axis Bank, as quoted by Mint.

If the account remains untouched for 10 years, the money in it is transferred to the RBI’s Depositor Education and Awareness Fund (DEA Fund). As of March 2024, around Rs 52,173 crore reportedly lay unclaimed in this fund, most of it from public sector banks. Even unclaimed fixed deposits older than 10 years are moved here.

The good news is that even a dormant account continues to earn interest, and banks cannot penalise you for not maintaining the minimum balance. However, if there were any unpaid fees or charges before the account became dormant, they will continue to accumulate and could impact your credit score if left unpaid.

How To Reactivate Your Account

Reactivating a dormant account is free of cost. Customers simply need to update their KYC documents and provide a written request to their bank. Some banks allow reactivation without a branch visit, but visiting in person can make the process faster. For joint accounts, all account holders must approve the request.

Simple Ways To Prevent Dormancy

It is easier to keep an account active than to reactivate it later. Even a small action, like transferring Rs 100 online, is enough. You can also set up automatic transfers, link the account to bill payments, or use it sometimes for online shopping.

If you have more bank accounts than you need, it is better to close the extra ones. This way, you won’t have to worry about them turning dormant.