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Everything You Need to Know About The Dormant Account

Dormant account

In today’s society, bank accounts have become a necessity. The country’s adoption of digital technology has made it possible for these bank accounts to reach even the most rural areas, where there was not a single bank just a few years ago. A lot of account holders also have multiple bank accounts, some of which are not actively used, held either jointly or in their names. There are various rules and regulations that we must all adhere to when it comes to our bank accounts. One of the main guidelines is that every few months, we should initiate some sort of activity on our accounts. A bank account that hasn’t been used for a while is considered dormant. A dormant account has remained inactive for a considerable amount of time. To learn more about the dormant account, keep reading this article!

What is Dormant Account?   

According to RBI rules, an account is considered dormant if there have been no transactions in it for more than two years. Banks turn inactive accounts into dormant accounts in order to decrease fraud. After an account has been designated as dormant, you are not permitted to log onto it, make payments, transfer money, or withdraw money. However, dormant accounts can still earn interest on their balances, which must be reported as income on tax returns.

This is done to protect the account holder’s interests and stop any chance of funds in the account being stolen, as well as for administrative reasons on the bank’s end. Once an account is marked as “dormant,” several restrictions are put in place that makes it hard for the account holder or anyone else with permission to access it without first getting permission.

Restrictions on the Dormant Accounts

Once an account is marked as “dormant,” it won’t get any new transactions or updates. This means that any money left in the account is frozen. Unless the user takes a specified action (such as moving the funds to a different bank account), the funds will eventually be lost forever. Since the RBI doesn’t tell banks how to put limits on dormant accounts, the limits vary from bank to bank. But some of the most important rules about a dormant account are:-

  • Limited usage of ATMs, internet banking, and mobile banking.
  • Restrictions on cheque transactions
  • Restrictions on issuing a new chequebook
  • Limits on changing or updating the address and other information, such as the signature, mobile number, etc.
  • There are limits on who can join or leave a joint account.
  • Restrictions on issuing or renewing ATM cards or other cards like debit or credit cards.

Dormant account

Advantages of Dormant Account

  • Having dormant accounts is a great way to keep your money safe and organised. They enable you to save money when necessary and avoid any costs or penalties associated with maintaining an active account.
  • Dormant accounts can also be a great way to save money for future needs. Keeping your money secure will reduce the likelihood that you may need it promptly. This will provide you with additional time to locate the most suitable investment or budget strategy for your long-term objectives.
  • Utilising a dormant account might also contribute to your privacy protection. Numerous banks and other financial institutions provide dormant accounts that are password-protected, meaning that only you and authorised bank personnel can access your account.
  • A dormant account is an excellent method to conserve money and continue to receive the benefits of your bank, even if you’re not using the account.

How a Dormant Account works

A dormant account is a bank account that hasn’t been used in a while since its owner hasn’t done anything to keep it active. An activity may consist of contacting a financial institution through telephone or the internet, login into the account, or making a withdrawal or deposit. Monthly interest or dividends that are automatically deposited into current, savings, or investment accounts are not considered activities.

State law says that an account is “dormant” after a certain amount of time has passed with no activity. State laws require that banks try to get in touch with the owners of dormant accounts by using the most up-to-date contact information. Most of the time, a statute of limitations does not apply to dormant accounts. This means that the owner or beneficiary can claim the money at any time.

If the owner can’t be found, the money in dormant accounts is considered unclaimed property and must be sent to the state’s treasury department.

How to reactivate a Dormant Account

To reactivate your dormant account, you must first contact customer care and submit the following information:

  • Name
  • Email address
  • The rationale behind your account reactivation
  • The bank or financial entity holding your dormant account.

After receiving this information, customer service will initiate an investigation and contact the bank or financial institution to request access to your account. Once customer service has received confirmation from the bank or financial institution that you are the rightful owner of this account, they will send you an email confirming the completion of the reactivation process.

Dormant bank accounts can be simply reactivated. To reactivate your account, you must utilise one of the following payment methods:

  • Transactions using a cheque.
  • Deposits of cash or cheques into your account.
  • Withdrawals and deposits via an ATM.
  • Online banking transactions are performed on an inactive account.
  • A transaction initiated by a standing order — ECS & EFT.
  • Mobile Banking transactions on your dormant account

So, to reactivate an account, you must submit a completed application to the bank, along with an explanation for the absence of transactions. You must be physically present in the financial institution with valid proof of address and evidence of identity. According to RBI regulations, there are no fees associated with reactivating a dormant bank account.

Difference between Inactive and Dormant Accounts

Inactive account

If you do not use your savings or current account for more than a year, it will be deemed inactive.

Dormant Account

Your savings/current account will be deemed dormant if it has not been used for transactions in over 24 months.

What happens to a Dormant or Inactive Account

If your account becomes inactive or dormant, system-generated transactions such as interest credit will no longer be valid. However, if earnings from a fixed deposit (FD) or dividends on your shares are credited to your savings account, such transactions will be considered customer-initiated. Thus, the savings account will be deemed active if the FD money and/or dividend are deposited into it.

Inactive accounts are ineligible for bank services such as Internet banking, debit card/chequebook requests, etc. Also, you will be unable to modify your phone number, address, or email address if your account is inactive. In addition to the limitations that apply to inactive accounts, dormant accounts are not eligible for ATM transactions, phone banking, or internet banking.

Dormant account

Escheatment process of Dormant Accounts

Escheat is a legal principle that transfers the unclaimed property or funds of a deceased individual to the state. Similarly, the procedure of escheatment in banking involves transferring these accounts’ unclaimed property to the state. An accounting record is created in the state’s books whenever an account has been inactive for a period (defined by each state) and active attempts have been made to identify the owner.

Escheatment laws regulate the transfer of unclaimed funds to the state and prevent their return to banking institutions. It mandates the transfer of unclaimed funds from inactive accounts to the state’s general budget for safekeeping. The state assumes responsibility for maintaining records and returning lost or forgotten goods to owners or their heirs if the owner has died.

By applying with their state, owners can reclaim unclaimed property at no cost or for a modest handling fee. Due to the state’s perpetual custody of unclaimed property, owners may claim their property at any moment.

Escheatment Resource

Numerous websites provide services for determining whether your account has been taken over by the government. In addition, there are both private and public websites.

The National Organisation of Unclaimed Property Administrators is a noncommercial website. This website allows users to look for dormant accounts under their name and social security number and provides contact information for the administrator. Each state has its escheatment provisions and expiration dates, just as it does with accounts.


A dormant account meaning is something you, as the account holder, really need to be aware of. This will ensure that you keep your bank account active by ensuring that you conduct a suitable number of transactions. Additionally, you can protect your account from being marked as inactive by taking any one of the several preventative steps that are available to you. To guarantee that your account is constantly active, it is imperative that you carry out a transaction, move funds through any of the available banking channels, withdraw cash, or write a cheque. This is vital because it ensures that no one else can access your money until you permit them to do so. Knowing this will bring you peace of mind.


1. What is the meaning of a Dormant Account?   

Ans: According to RBI rules, an account is considered dormant if there have been no transactions in it for more than two years. Banks turn inactive accounts into dormant accounts in order to decrease fraud. After an account has been designated as dormant, you are not permitted to log onto it, make payments, transfer money, or withdraw money. However, dormant accounts can still earn interest on their balances, which must be reported as income on tax returns.

2. How to activate the Dormant Account?  

Ans: Steps to activate dormant account:

1: Go to the branch and hand in a written application that has your signature and the operating instructions for the account.

2: Provide self-attested identification and address documentation.

3: Finally, make a transaction to reactivate your account.

3. How to close the Dormant Account?

Ans: By requesting the bank, a dormant bank account might be closed. The owner can move the account’s money to any other account, and then the bank will shut the account. In most instances, the bank attempts to locate the account holder and, if unsuccessful, notifies the state of the account’s status.

4. Can you move funds from your active account to your Dormant Account?

Ans: No, you can’t move money from your bank account to your dormant account. If you have a dormant bank account and need to transfer funds to it, you should call your bank and become familiar with the transfer method. Then, funds can be transferred to the dormant account.

5. Can a Dormant Account receive interest on the funds deposited?

Ans: Yes. Dormant bank accounts are eligible to receive interest at the same rate as the bank’s savings account. However, this interest credit will not be regarded as a genuine transaction for reactivating the account. 

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