Inoperative bank accounts must be attended to. Banks generally close internet banking, ATM, phone banking and such other facilities on such account.
Deepali was an ambitious girl, working in the insurance sector. She worked in her home town for two years and then switched to a new company. With the change of job came the change of the city and a new salary account. By the year-end, she got an e-mail from the bank in her hometown, intimating her about her non-operative bank account.
This could happen to any one of us. What should one do in case his or her bank account becomes inoperative?
Let us see what the implications of having an inoperative account are and what steps to take.
What is an Inoperative or Dormant Account?
“Inoperative” means not functioning, and non-functioning of a bank account continuously for 2 years brings it in the category of non-operative or dormant account. Here, non-functioning means “non-functioning of transactions” by the account holder. As per Reserve Bank of India (RBI) guidelines, this rule applies to both savings as well as a current account.
Making bank account inoperative does not mean freezing of your bank account. It is done to safeguard your account from the risk of fraudulent activities.
What are Transactions?
Transactions in bank accounts means “Customer Induced Transactions”. This includes:
•Debit and credit of money by the account holder through ATM, net banking, mobile banking, cheques etc.
•Money moved by a third party from your account such as money deposited into your account or debited through cheques.
•A standing instruction to the bank by the account holder such as payment of utility bills of the account holder is also considered as a valid transaction.
The interest credited or charges debited by bank are not considered as a ‘transactions’ by which an account can be saved.
When does a bank assume an account as inoperative?
If there is no transaction in the account for one year, the bank tries to contact the account holder or the nominee. In case of no replies, the bank will send intimation to account holder 2 or 3 months prior to treating his inactive account.
On continuation of this ‘inactive’ status for 2 years, the status becomes ‘inoperative’ or ‘dormant’. The process will be completed by sending a correspondence to the account holder, declaring the account as ‘inoperative’.
•No valid transaction for 1 year – inactive bank account.
•No valid transaction for 2 years – inoperative bank account.
What are the charges associated with inoperative account?
Banks can apply charges if there is non-maintenance of minimum balance involved. However, banks cannot charge customers for reactivation of an inoperative account. An RBI circular issued in this regard in 2014 has asked banks not to charge any penalty for non-maintenance of minimum balance in the inoperative account.
However, banks can close ATM, Internet banking, phone banking and other services from an inactive or inoperative bank account. However, interest for the amount in the account will be credited on a regular basis by the bank, irrespective of account’s status.
Does inoperative account impact your CIBIL Score?
Keeping your account inoperative may not affect your credit history. However, it is advisable to officially close your inoperative account if not in use, as it would reduce the chances of fraudulent activities on your account.
How to change the status of a “Dormant Bank Account” to an “Active Bank Account”?
An inoperative account can become an operative account within 24 hours. All you need to do is to submit an application along with identity proof and passbook or cheque book to your bank, stating the reasons for absence of valid transactions.
After completion of “Know Your Customer” formalities, banks usually put the customer’s account on Active mode within 24 hours.
Remember, there is no reactivation charge on a dormant account.
An inoperative account will have restrictions for several transactions including ATM withdrawal, internet or phone banking, issuing new cheque books, etc. All these are intended for the safety of the money in the account. Otherwise, it may increase the risk of fraudulent transactions from your account.
If you are having more than one account, it is always better to keep tabs on them or making some small transactions just to keep them active. In this age of netbanking, all it takes is a few mouse clicks and your account would remain operational.