What really happens to your bank account after two years of inactivity

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How banks define inactivity

A bank account is "inactive" when no customer-initiated transactions—e.g., deposits, withdrawals, fund transfers, or even internet banking logins—have occurred over a continuous 12-month period. If inactivity goes on for 24 months, the account becomes legally classified as "dormant" under Reserve Bank of India (RBI) rules and similar rules in other countries.

What occurs when accounts have not been used for two years

When your account is marked dormant, banks restrict a number of services. You may not be able to withdraw money from ATMs, fund online transactions, or use debit cards issued against the account. Interest on savings still continues to accrue, and dividends or refunds can still be credited, but you cannot use the account at liberty until it is reactivated. This is primarily done as a fraud and abuse protection against overlooked or abandoned accounts.

The risks of a dormant account

A dormant account can cause more problems than simple operational hassle. All outstanding instructions, auto-payments, or direct debits on the account will become invalid. There is also the risk of missing out on essential credits such as wage, tax credits, or investment returns if they are paid into the dormant account. Also, if not disturbed for much longer, unclaimed balances would eventually be transferred to a central authority, e.g., the Depositor Education and Awareness Fund (DEAF) in India.

How to re-activate a sleeping account

Reactivating a dormant account is usually simple but requires effort on your part. You will have to visit the branch with identity and address proof and submit in writing a request for reactivation. Some banks also offer reactivation through net banking or mobile banking if it is linked with new KYC information. If authenticated, the bank will resume normal activity, and you can conduct your account as usual.

How to prevent dormancy in the first place

The simplest thing to ensure that your account does not fall into dormancy is to make at least one transaction annually. Deposit some hundred rupees, withdraw, or transfer some money using a fund transfer - it will reset the clock. Online balance checks or regular updations of the passbook at the branch also work. Small and frequent transactions keep your account active and away from future woes.

FAQs

Q1. Is there a dormancy charge on bank accounts?

Banks do not generally levy additional charges for dormancy but may suspend some facilities like SMS reminders or cheque books depending upon renewal.

Q2. Is interest paid on a dormant savings account?

Savings accounts accumulate interest even if they are in a dormant state, and the interest is credited every now and then.

Q3. What happens if a dormant account goes unattended for many years?

If the balance remains unclaimed for a very long time, the banks are required to transfer the money to a central unclaimed deposits fund. It may still be claimed by the customers or heirs later with proper documentation.