The truth about inactive bank accounts you rarely hear about

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One day, you notice an account on your banking app that you haven’t accessed in years. This is quite innocuous-looking, but banks are actually very vigilant when it comes to inactivity. In India, an extended period of time without an initiated transaction triggers a clock that begins ticking, and what follows may shock some bank customers.

After two years without activity, the status of your savings account would be considered inactive. What this means is that there has been no deposit, no withdrawal, no transfer, and no cheque transaction originated from your side. Bank interest credited does not generate activity. After the status change, the account does not close but is restricted. You might lose access to using a debit card, internet banking, and processing a transaction until you reactivate the account.

Inactive accounts are more than just an accountancy problem. Banks consider inactivity a higher risk with regard to fraud and compliance. An inactive account with some money in it may turn out to be very vulnerable to misuse. To be on the safe side, banks implement stricter policies in this regard. It is in accordance with regulatory policies as well, as they prescribe updating customer data and account tracking.

On the brighter side, your money is not lost. This is because your money is secured in the bank, and the interest continues to accumulate according to the saving rate. On the other hand, you may not get your statements or notifications any more. Value-added services corresponding to your account may also stop being offered by the bank. This applies in cases when the account has fees, for example, minimum balance fees, which will continue to drain your money.

Activation of an inactive account is not as agonizing as one thinks. In most banks, a simple visit to the bank branch, making a request to revive the account, and following a quick Know Your Customer procedure is all it takes to start functioning as usual, including debit card and online facilities. In fact, some banks support partial activation using net banking, followed by physical verification at a later stage.

If there is no activity for a period of ten years, the account is deemed to be inoperative, and the amount is shifted to the ‘Depositor Education and Awareness Fund’. However, even then, the amount will not go unclaimed. You can withdraw the amount by providing necessary documentation and making a claim, although that will require more time and red tape.

The easiest way around all of this is by utilizing the account at least once per year. This could be done by transferring the minimum, depositing cash, or even updating the information. This is the same thing as checking in periodically, so the account doesn’t go mute at the moment when you need it the most.