Bank Accounts Left Idle For Two Years Face Restrictions & Risk Of Fund Transfer
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Leaving a bank account untouched for too long can trigger unexpected complications. Financial regulators classify accounts without customer activity for two years as dormant, restricting most transactions until reactivated. Experts caution that this is more than an administrative step — it signals disengagement and can result in inconvenience for customers who fail to maintain minimum levels of activity. With unclaimed deposits swelling in recent years, the issue has become a matter of increasing importance for both banks and depositors.
Industry professionals explain that while dormancy itself does not affect an individual’s credit score, unpaid charges or penalties that accumulate in such accounts could create liabilities, indirectly affecting creditworthiness. Importantly, banks are not permitted to impose penalties for non-maintenance of minimum balance while the account remains dormant.
Special portals have been introduced to help customers trace unclaimed deposits across banks, allowing individuals to check whether their funds have been transferred. However, industry experts emphasise that while the money can be claimed, the process involves additional paperwork and verification.
While some institutions allow reactivation through digital means, visiting the branch is generally recommended for faster resolution. Bank representatives often advise that even a single small transaction periodically can prevent dormancy, ensuring a smooth relationship between the customer and the bank.
Customers juggling multiple accounts are advised to consolidate and close unused accounts rather than leave them dormant. Setting reminders or creating standing instructions for transfers between accounts can also help maintain activity. Informing the bank of inactivity in advance may also help in keeping the account in operation.
Disclaimer: This article is intended for information purposes only and should not be taken as financial advice. Readers are encouraged to consult qualified banking professionals or financial advisors for guidance tailored to their circumstances.
What Happens When An Account Turns Dormant
According to experts, once an account is tagged as inoperative, the customer effectively loses access to most banking facilities. Withdrawals, deposits, ATM use, and digital transactions are all blocked until the account is reactivated. Even non-financial requests, such as address changes, cannot be processed. While the account may continue to accrue interest, the customer cannot freely use the funds.Industry professionals explain that while dormancy itself does not affect an individual’s credit score, unpaid charges or penalties that accumulate in such accounts could create liabilities, indirectly affecting creditworthiness. Importantly, banks are not permitted to impose penalties for non-maintenance of minimum balance while the account remains dormant.
Escalation Of Unclaimed Deposits
Recent data highlights the sheer scale of idle balances. Billions of rupees currently lie unclaimed in the Depositor Education and Awareness Fund, a pool managed by the central banking regulator. A significant share of these balances originate from public sector banks. This fund also receives unclaimed fixed deposits and other term balances left untouched for more than a decade.Special portals have been introduced to help customers trace unclaimed deposits across banks, allowing individuals to check whether their funds have been transferred. However, industry experts emphasise that while the money can be claimed, the process involves additional paperwork and verification.
Process Of Reactivating An Account
Financial professionals point out that reactivation of dormant accounts does not attract charges, but it requires completion of Know Your Customer (KYC) formalities to establish ownership. Customers must provide identification documents and sometimes a reason for inactivity. For joint accounts, approval from all holders is necessary.While some institutions allow reactivation through digital means, visiting the branch is generally recommended for faster resolution. Bank representatives often advise that even a single small transaction periodically can prevent dormancy, ensuring a smooth relationship between the customer and the bank.
Preventing Inactivity With Simple Steps
Experts underline that prevention is easier than cure. Dormancy can be avoided with minimal effort, such as scheduling a small recurring transaction or linking the account to regular payments. Transactions initiated by the bank itself, such as interest credit or deduction of charges, do not count towards account activity.Customers juggling multiple accounts are advised to consolidate and close unused accounts rather than leave them dormant. Setting reminders or creating standing instructions for transfers between accounts can also help maintain activity. Informing the bank of inactivity in advance may also help in keeping the account in operation.
Why The Issue Matters More Now
The rise in dormant accounts has wider implications for the banking ecosystem. Apart from locking away customer funds, it increases administrative burden for banks and regulators. For individuals, it represents an avoidable obstacle that can delay access to their own money and create unnecessary paperwork. Experts emphasise that with just a small measure of attention, customers can safeguard themselves against the inconvenience of dormancy.Disclaimer: This article is intended for information purposes only and should not be taken as financial advice. Readers are encouraged to consult qualified banking professionals or financial advisors for guidance tailored to their circumstances.
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