How to access funds from dormant account
Anand Aras
Have you ever wondered why you couldn’t withdraw money from an old and largely forgotten bank account despite having an adequate balance? I bet you have or know someone who has. Welcome to the world of inoperative or dormant accounts.
Reversal process
The reason you couldn’t draw that extra money — and gift yourself the latest smartphone in the market — is because your bank rendered your account inoperative or dormant. This is at best annoying but it’s not alarming. You can set the process of reversal any time and access your unutilised funds. We will discuss this and more below.
Typically, banks classify a current or savings account as “inoperative” and “dormant” if there have been no transactions for more than 12 and 24 months, respectively. The RBI broadly defines transactions as cash deposits and withdrawals at a branch or automated teller machine (ATM), payments by cheque and transfer of funds through internet or phone banking. System generated transactions such as interest credits are not considered valid.
However, dividend on shares or proceeds of your fixed deposit in your account will be considered as customer induced transaction.
Bank accounts most likely to be classed as inoperative or dormant are those lying unused for several years due to the migration of the account holder to another city or country, illness or death in case of a single holder, disputes arising out of several claims on the account or absence of nominees. However, half-yearly interest and interest from fixed deposits continue to be credited even to a temporarily idle account.
Legally, banks are within their rights to deem an account inoperative to protect the customer from fraud or unauthorised transactions. Hence, the moment an account is termed as inoperative, a customer cannot use most of the facilities, including internet banking, debit card and cheque book.
Know your rights
At times, banks levy a penalty for not maintaining a minimum balance and customers are worried they may have to pay service charges for reviving their dormant accounts. Not many are aware that as per RBI guidelines, banks cannot charge customers for lack of minimum balance in an inoperative account, or for reactivation. Customers should, therefore, know their rights with regard to inoperative or dormant accounts and refuse to pay such charges. If a bank insists on levying charges then the aggrieved customer may approach the Grievance Redressal Cell of the bank.
Inoperative accounts are also susceptible to frauds. In case where an old address is not updated, bank account statements and personal details can fall into wrong hands when delivered physically. There have been many instances where inoperative accounts have been subject to fraud on account of information being shared knowingly or unknowingly. Also, if an account is inoperative for more than 10 years, the amount has to be transferred to Depositors Education and Awareness Fund (DEAF) operated by the RBI. Once the amounts are transferred to this Fund, there is a procedure involved to reclaim the funds.
To protect the rights of banking customers, the Banking Codes and Standards Board of India (BCSBI) — an independent and autonomous body promoted by the RBI — has formulated and prescribed codes for banks.
Although member-banks must adhere to these codes, it is the responsibility of customers to understand the codes and question their respective banks in the event of non-compliance.
BCSBI has specific codes for inoperative and dormant accounts. For example, at the time of opening an account, banks need to inform customers the circumstances under which their accounts can become inoperative or dormant. Customers have to be informed at least three months prior to their accounts becoming inoperative or dormant, and the underlying consequences. Both single and joint holders should be informed of the impending action via sms/e-mail, and they should be advised as to how they can reactivate their accounts.
Reactivation
Reactivating an account is not too difficult. Account holders can call at their respective bank branch or customer care for guidance. They will also have to write to their bank giving reasons for not operating the account and expressing a desire to reactivate it. The letter should be signed by all the account holders. This will have to be accompanied by KYC documents to establish your latest proof of identity and address.
I reiterate that reactivating an inoperative or dormant account attracts no charges.
The best way to avoid an unused account from turning inoperative or dormant is to close it in case you do not require it. If the account is important to you, then try to transact on the account at least once a year, to keep it active. A better idea would be to use the account for receiving dividends/ interest on your investments. Also keep your bank advised of your latest correspondence address and your current mobile number to receive correspondence/ SMSs related to your transactions and service charges. This way you not only avoid deactivation but also get to immediately withdraw your available funds in times of need.
The writer is CEO, Banking Codes and Standards Board of India. The views expressed in this article are his own
