What Is a Dormant Account ?
A dormant account is one that has been inactive for an extended period of time, with the exception of interest deposits. The account holder may have forgotten about it, moved out of town without providing a forwarding address, or died.
A dormant account with a low balance may simply disappear, reaching zero due to monthly bank fees that outweigh any interest earned. If not, the remainder is given over to the state, who will return it to the proper owner if requested. Financial organisations are compelled to remit funds held in dormant accounts to the state treasury after a certain period of time. The length of time varies per state.
Understanding Dormant Accounts
If an account has been inactive for an extended length of time, it will become dormant. Deposits, withdrawals, and money transfers are all possible activities, as is merely login into the account. The automatic posting of interest and dividends is not considered an activity. In addition to checking and savings accounts, other types of accounts can go dormant after being inactive for a period of time. Financial institutions may hold accounts such as pension funds, 401(k), brokerages, and others.
The idle duration that converts a general account to a dormant account may be decided by the account provider. varying financial institutions have varying dormant account periods, and policies may change. The Canadian Imperial Bank of Commerce (CIBC) considered an interest-bearing account dormant if it was idle for 12 months, with no deposits, withdrawals, or cheques. The bank likewise considers a non-interest-bearing account defunct after six months of inactivity. In February 2020, CIBC revised their policy, extending the period to 24 months for all personal deposit accounts.
What happens if your savings bank account becomes dormant account ?
Different financial institutions have different policies regarding dormant accounts. If a dormant account has no balance, certain institutions will close it after a set time period. However, if you have an account with IDFC FIRST Bank, you will be notified before it is closed. The following services and transactions are not authorised if your account is dormant:
- Change of Residence
- Renewing an ATM or debit card
- Adding or removing a joint account holder
- Change of Signature
- Transactions via internet banking or in a bank branch
What transactions should the customer initiate to keep the account from becoming dormant?
According to the Reserve Bank of India (RBI) regulation, in order to avoid an account becoming dormant, the user needs initiate at least one of the following transactions within every 24 months.
- Withdraw cash from an ATM
- Withdrawal of cash from the bank branch
- Deposit of cash into the account
- Payment via cheque
- Transfer of cash online using net banking
- Transfer of cash via phone banking
- Deposit of a cheque in the account
- Dividend was credited to the account.
- FD interest was credited to the account.
- Online Bill Payment
- SIP transactions
How Do I Reactivate a Dormant Account in Union Bank of India ?
Union Bank of India allows you to restart a dormant account in any of the following ways:
1. Submit a request to activate your account through Internet banking.
- You should go to the Union Bank of India website.
- Log in to Internet Banking using your User ID and password.
- Go to the service requests section.
- Request to Reactivate the Account
2. Call Union Bank of India’s Customer Care Number.
You can phone Union Bank Of India’s Customer Care Number from your registered mobile number and request for reactivating your account.
3. Contact your home branch of Union Bank of India.
- Approach the home branch of Union Bank of India personally.
- Submit a written request to the bank in person to modify the status of the account from ‘dormant to active’.
- To revive an account, all joint holders must sign this request, regardless of the operating mode.
- Compliance with the most recent KYC documents is required. All account holders must submit passport-sized colour pictures, copies of their PAN cards, proof of address, and proof of identity. Do not forget to bring the originals for verification purposes.
- You also need to give valid reasons for not operating the account in the past.
- Account holders’ signatures may also be validated to activate the account.
- If the bank believes it necessary, account holders may be asked to relinquish their ATM cards or chequebooks. In this situation, the bank will provide a new ATM card and chequebook. However, this may not be required.
- Union Bank of India will check customer credentials before reactivating a dormant account.
- You will be requested to make a transaction by cheque or at an ATM.
- If all prerequisites are completed, the account will be enabled within 24 hours.
Documents Required for Reactivating Dormant Account :
- Duly filled out application for reactivating dormant account.
- KYC documents must be self-attested.
- Proof of doing at least one financial transaction in the bank account.
FAQs
Do all banks have to stipulate the same time period for classification of an account as dormant?
Yes, because RBI has stipulated that a savings / current account will be classified as dormant / inoperative if there are no transactions in the account for over a period of two years.
If interest on a term deposit with the bank is credited to the account will the account remain operative?
Yes. The account will be treated as operative because such credit is as per the mandate of the customer. Similarly, any ECS credits e.g. dividends or ECS debits e.g. payment of utility bills keep an account operative. Also, if a customer has two accounts he can mandate a single debit from one account for credit to his other account and keep both accounts operative.
Will a bank continue to pay interest on the balance in a dormant savings bank account?
Yes. Interest on the balance will be credited to the account regularly even if it is dormant.
Is the bank required to inform the customer about his account becoming dormant?
Yes. This happens in two stages:
First Stage: The bank is required to review annually all Savings Bank / Current accounts and if there have been no “transactions”, the bank is required to inform the account holder to activate the account by putting through any single debit or credit transaction which can also be put through by a third party.
Second Stage: If the account is not activated in the second year also then the bank is required to inform the customer three months prior to the account being classified as dormant.
Can a customer issue a cheque on a dormant account?
Yes. However, the bank will have to exercise due diligence as to the genuineness of the transaction, verification of the signature, identify, etc. and use its discretion while making payment.
