Old bank accounts are often ignored by people, in the form of salary accounts from old employment, savings accounts from college, or bank accounts opened with a purpose and then forgotten. It might not be considered harmful, but not using a bank account for a long time can cause serious problems. It is a risky behaviour that can lead to the loss of your bank account, money, and security, and even future transactions.
This blog explains the meaning of a dormant account, the risks associated with it, and how to prevent them in straightforward language.
What is a Dormant Bank Account?
A bank account is considered inactive after 12 months without a transaction, such as a withdrawal, deposit, ATM use, UPI payment, or internet banking.
When this inactivity goes on for a period of 24 months, the bank will show the account as dormant.
A dormant account means:
- Your ATM and debit card are malfunctioning.
- UPI is not an option in terms of transfers of funds.
- Access to Net banking and mobile banking is blocked.
- The check clearing can include KYC at the branch with withdrawals or deposits.
This is a rule that banks live by as inactive accounts are likely to be abused, laundered and misused.
Major Risks of Leaving Your Bank Account Inactive
1. Full Freezing of Account Services
The greatest danger of not using your bank account is that the bank will freeze the account. You cannot:
- Withdraw money
- Transfer funds
- Use the ATM card
- Perform UPI transactions
- Access mobile banking
To reopen your account, the bank would need a full KYC, such as identity documents, address proofs, photos, and signatures. This is time-consuming and inconvenient, particularly when one requires the money urgently.
2. High Risks of Fraud and Unauthorized Access
The dormant accounts are simple targets of fraudsters since:
- Customers do not look at balances much.
- The notifications can be outdated.
- The account holder loses the memory of the account.
- Attackers attempt to connect accounts by making unauthentic KYC.
Fraudsters tend to target dormant accounts where suspicious activity may go undetected for months. Some of them include unauthorized withdrawals, phishing, and identity theft.
This is what makes fraud one of the most dangerous risks of not using your bank account.
3. Penalties, Charges, Loss of Interest
In nearly every bank account, a minimum balance has to be maintained. In the case of the balance dropping below the limit and no operations are made, the bank can:
- Deduct non-maintenance charges.
- Deduct service fees
- Stop interest credit
- Apply penalties over time
Without you knowing, your money is gradually dwindling away as a dormant account is usually unattended to. The size may reduce drastically in months or years.
4. Impairment in Closing or Transferring Money
It is very difficult to close a dormant account compared to an active account. Banks typically ask for:
- Passport-size photos
- Updated ID proof
- Fresh address proof
- Signature re-verification
- Written request forms
You might have to wait or visit the bank several times when your documents do not match the old ones of the bank.
There is also the added complexity of having to reactivate a dormant account first before the transfer of funds.
5. Issues when taking Loans, Credit cards, and EMI
An inactive account can have an indirect impact on your:
- Loan eligibility
- Credit card approval
- EMI setup
- Financial profile analysis
Banks evaluate your financial character with ease. There are several stagnant accounts that give the impression of financial mismanagement. This may cause unnecessary hurdles when one applies for home loans, business loans or car loans.
6. Probability of Moving to RBI in 10 Years
When a bank account is inactive for a 10-year period, the complete balance of the account is to be transferred to the Depositor Education and Awareness Fund (DEAF) of the RBI.
Though this amount may be reclaimed later, the process is complicated and needs:
- Detailed forms
- Old passbooks
- Proof of ownership
- KYC documents
- Bank verification
Most individuals do not get their money back when they forget about the account. This is among the gravest dangers of leaving your bank account inactive, as your hard-earned money is placed in the RBI’s system.
Why Do Bank Accounts Become Dormant?
- Change of Jobs Salary Accounts: When the employees change companies, the previous salary account credits are no longer deposited. With time, it becomes dormant and then goes inactive.
- Keeping More than one bank account: They open accounts with the aim of saving, an EMI offer or an offer. Having too many accounts, some of them get left for months.
- Moving to a New City or State: A change in location is likely to cause the abandonment of older accounts opened in hometowns.
- Ignorance of Awareness of Rules of Banks: Not all of the customers are aware of the fact that their accounts can be frozen due to a 24-month period of inactivity.
Reinstating a Stagnant Account
In order to reclaim your unproductive account:
- Go to the bank office in person.
- Bring Aadhaar, PAN, address evidence, and photos.
- Send a reactivation application.
- Complete the KYC process.
- Initiate it by making a small deposit or withdrawal.
When this is done, your ATM and online banking services will resume.
Conclusion
There is a higher probability of leaving your bank account idle than most people think. An inactive account can be a source of significant financial stress, including frozen access, fraud opportunities, fines, difficulty recovering funds, and lengthy procedures with the RBI.
The most secure solution is to keep your accounts active with small, frequent transactions and to keep KYC and unwanted accounts up to date. Being vigilant and active in your banking business is a sure way to keep your money safe and available, ensuring it is secure at all times.
