Steps to Reactivate Your Dormant Account Online in 5 Minutes – 2024

Dormant accounts are silent and inactive accounts for an extended period. If overlooked, they can pose financial risks and trigger fees or restrictions to the owner. The dormant period could be from six months to several years.

What is the Meaning of a Dormant Account?

Having a bank account dormant means any account of a customer at a bank or other financial institution that has not been used or seen activity for an extended period. This could be due to the customer needing to remember about the account or having opened another bank account to function. Another reason for a dormant account could be the owner has died. In case the owner moves to another city, they can ask the bank to transfer the balance into their new account after closing the current bank account. 

When a person leaves with a bit of bank balance, it simply evaporates to zero due to monthly fees charged by the bank. There also comes a point when the monthly fees exceed the balance, and the balance becomes negative. After a specified period of dormancy, the money held in a dormant bank account is transferred to the state treasury. The state decides the period.

Working of Dormant Account & Example

A dormant account is a bank account that has not experienced deposits, withdrawals, or other transactions for usually a year or more. In this case, the bank may protect the owner’s funds to prevent fraud or unauthorised access. Before declaring the bank account dormant, the bank takes several steps to notify the holder. For example, the bank may often send notifications via SMS, calls or emails of inactivity. Later, the bank may restrict access until the owner files a reactivation request.

The Escheatment Process for Dormant Account

Transferring the funds held in the dormant account to the state’s treasury is a legal process. The account holder can later reclaim the funds. Each state has an enacted escheatment statute that has laid down rules to govern the process of transfer of funds to the state for the general fund or safekeeping. This statute also applies to the lost and forgotten properties of the owners. The owner can recover the unclaimed property free of cost by filing a request with the state where the account was opened. 

The process of escheatment for a dormant account is as follows:

• Step 1: Identification: The financial institution identifies the account that has been dormant for an extended period. 
• Step 2: Notification: The bank sends multiple notifications to the account owner via mail, call, SMS or other forms of communication stating its inactivity. 
• Step 3: Waiting period: After notifying the customer, the bank waits for a stipulated time set by the bank policies. 
• Step 4: Verification: After the waiting period, the bank ensures that all the criteria for escheatment are met. This process is done in compliance with the legal and internal policies of the bank and state. 
• Step 5: Escheatment Report: After the verification process, the bank prepares an escheatment report that includes all the details of the dormant account, such as name, account number, account balance, and period of dormancy.
• Step 6: Transfer of funds to state treasury: After the escheatment report’s approval, the dormant account balance is transferred to the state treasurer. 
• Step 7: Record Keeping: The bank records the whole escheatment process account to maintain transparency and accountability. 
• Step 8: Reclaiming of dormant account: In many cases, if the balance of a dormant account is more, the account holder may come to claim the funds or reactivate the dormant account. The account holder has to follow specific rules and regulations and provide proof of ownership.

Examples of State Processes for Reclaiming Property

The state processes for reclaiming the dormant account vary from state to state. However, each state involves specific vital steps that are governed and processed according to the state statute. Many states have dedicated departments for unclaimed properties, including a dormant account. To reclaim the property, the owner has to file a request with the state department proving their identity and ownership. After the identification, the State Department will verify the claim through a thorough investigation of the documents. In case there is no discrepancy between the owner’s claim and documents, the request is approved. The dormant account’s funds are reimbursed to the owner through a cheque or digital transfer. 

If Some one Have Unclaimed Money Out There. What Do I Do?

There are many commercial and governmental unclaimed property search services present at the moment. These are both online and offline services. In India, there is a UDGAM Portal, i.e., Unclaimed Deposits Gateway, for accessing information. The Reserve Bank of India launched it as a centralised web portal to help people quickly locate their unclaimed deposits across multiple banks in the country.

How Can I Claim My Money From a Dormant Account?

If you are aware that you have a dormant account, the first step is to approach your bank with the proper proof of ownership and identification. For example, your identification ID, such as an Aadhar Card or PAN Card, and ownership proof, such as a bank statement. If the account is just inactive and money has not yet been transferred to the state, you can apply for reactivation of the account. If the account has been deemed dormant and the fund is sent to the state department, you need to contact the concerned department in the state treasury office and apply for reclamation. The state treasury has a proper process and regulations when it comes to the reclamation of dormant accounts.

What is an Inactive Account?

An inactive account typically refers to any account with a bank or any other financial institution that has had little to no customer-initiated transactions over an extended period. Unlike dormant accounts, inactive accounts might still be operational.

Difference Between an Inactive and Dormant Bank Account

Every bank has different policies and guidelines for declaring a bank account dormant or inactive. Here are a few of the general distinctions between an inactive bank account and a dormant bank account. Read on! 

How to Reactivate an Inactive Savings Account?

Reactivating an inactive savings account is less time-consuming than a dormant savings account. Follow these steps to reactivate your savings account:

• Step 1: Assess whether your account is inactive or dormant with the bank. 
• Step 2: Upon the confirmation of its inactivity, initiate a transaction from your end, such as withdrawal or depositing funds. 
• You can deposit or transfer a minimum amount to make your savings account active again. 
• Step 3: Check with the bank for the account status. 

How to Reactivate a Dormant Savings Account?

Every state and banking institution follows a different statute for the reactivation of a dormant account. However, here is a general guideline to reactivate your dormant account in India:

• Step 1: Visit your bank branch and collect all the details about the reactivation process. If, for some reason, you cannot visit the bank branch, you can call the customer care toll-free number or read the bank’s website. 
• Step 2: Initiate the reactivation process. Keep all the documents of identification handy. These documents can include any valid government-issued ID, such as a PAN card or passport. 
• Step 3: Get ready all essential documents to prove the ownership of the dormant account, such as bank documents, passbook, etc. 
• Step 4: Submit the reactivation application according to the bank mandate and the required documents. 
• Step 5: When the bank verifies and approves your claim, you can initiate a transaction to check the account status. 
• Step 7: Confirm the reactivation, and your dormant bank account is active again.

Steps to Close Dormant Account

Follow these steps to close a dormant bank account:

• Step 1: Visit your bank branch to confirm the status of the dormant bank account.
• Step 2: Submit the required documents to prove your ownership of the dormant account.
• Step 3: Apply for reactivation of the account. 
• Step 4: Pay all the pending charges charged to your account during the dormancy. 
• Step 5: Fill out the closure form of the concerned account.
• Step 6: If you have funds left in the account, provide the bank with accurate details of another bank account to transfer funds. 
• Step 7: Pay any levied charges by the bank. 

And your account is closed. 

What are the Charges Associated with Dormant Account

According to the RBI’s guidelines, banks are not supposed to charge maintenance charges once the account has been deemed inoperational. The banks will be penalised if they charge the dormant account. However, in some instances, the interest charges and service fees are charged by the banks, leading the bank account to zero balance.  

What is the Maximum & Minimum Limit in Dormant Account

The maximum and minimum limit in dormant savings accounts varies from bank to bank and the bank’s location. For example, In HDFC, the minimum balance to maintain is INR 2500 for savings accounts in rural areas and INR 10,000 for urban cities. 

Importance of Dormant Account

• Asset Preservation: Dormant accounts help preserve and protect account holders’ funds by restricting activities to avoid any financial fraud.
• Customer Protection: A dormant account is protected under specific guidelines issued by the state to handle inactive accounts. There are rules and proper procedures to verify the claims for dormant accounts. 
• Financial Tracking: Banks monitor dormant accounts to identify trends in the financial market. 
• Unclaimed Property Management: Proper guidelines and regulations have been laid down by the RBI and government for the maintenance of unclaimed properties. And a procedure for reclamation of the property to its owner or their heirs. 
• Maintains Transparency in the Financial System: Deeming the bank account as dormant puts it under a category where it is governed under special rules. A record is held in the State Department, keeping the financial system transparent and responsible.

Characteristics & Features of Dormant Account

1. Characteristics of a Dormant Account

• Inactivity: A dormant account is inactive for a very long time. There is no transaction from debit or credit of money in the account for a time mentioned by the financial institution. 
• Communication: The bank notifies the customer about the account’s inactivity through various means. After the communication is unsuccessful, the account is deemed dormant. 
• No Transactions: There are no withdrawals, deposits or any other transactions during the dormant account period. 
• Asset Preservation: The assets or funds associated with dormant accounts are secured by the government until they are reclaimed. 
• Regulations: These accounts are subject to rules and guidelines set by the financial institutions and government to ensure transparency. 

2. Features of Dormant Account

• Notification: The bank follows particular guidelines of issuing a notification to the account holder when their account is on the verge of becoming dormant. 
• Maintenance Fee: Some banks can charge maintenance fees on the dormant account. Recently, RBI imposed a penalty on setting a minimum maintenance fee on a dormant account. 
• Reactivation: The account owner has an option at various steps to reactivate the account. In the initial stages, they can reactivate the account by initiating transactions and, in later stages, applying.
• Escheatment Procedure: After a specific time, the dormant account funds are transferred to the state government’s treasury as an unclaimed property. 
• Monitoring: The dormant accounts are vigilantly monitored to avoid any fraudulent activity or unauthorised access.

What are the Challenges Associated with Dormant Account

Here are the challenges associated with dormant accounts summarised in points:

• Dormant accounts pose a money laundering risk to the financial system. Managing and tracking funds in a dormant account over some time is time and resource-intensive. 
• Maintaining regulatory compliance in case of a dormant account is time-consuming. The bank notifies the customer at various times through various means of communication. By performing menial tasks, the bank’s resources need to be appropriately utilised. 
• Tracking down the customer is challenging. Before declaring the account dormant, the bank tries its best to communicate with the customer. Sometimes, the customer has changed the address or phone number, or the information provided needs to be updated. 
• RBI has declared that the bank shall not levy any maintenance charges on the dormant account. This has posed a considerable challenge in managing the administrative cost of tasks associated with the dormant accounts. 
• If an account is dormant for a very long time, there is a risk of facing escheatment. The entire fund of the dormant account is transferred to the state’s treasury department. 
• The reactivation of a dormant account can be a challenging task. The owner has to prove its ownership and has to go through multiple verification processes.

List of Advantages & Disadvantages of Dormant Account

1. Advantages of Dormant Account

• Having a dormant account is an excellent way to keep your funds safe. After a specific time, the bank freezes the account and imposes restrictions, which prevents it from fraudulent activities. 
• With a dormant account, you can avoid all the management charges and minimum fees. It will provide additional time to find a more suitable long-term investment. 

2. Disadvantages of Dormant Account

• It is difficult to access if you forget your password or login information.
• Lack of proper monitoring can increase the risk of unauthorised access or financial fraud. 
• The bank can levy dormancy charges, which can lead to your account balance being negative. 
• The hassle of following a reactivation process and guidelines.

Conclusion

A dormant account is an integral part of the banking system. It offers security and reduces the risks of financial loss. However, at the same time, it can lead to the loss of your entire savings in case of a forgotten password or inability to prove your ownership.

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Disclaimer

This article is solely for educational purposes. Stable Money doesn't take any responsibility for the information or claims made in the blog.