If there has been no transaction in your savings bank account for two years, except for interest payments credited by your bank, the bank will classify your account as inoperative or dormant. You will not be able to use your ATM card, issue cheques or transact in the account without reactivating it.
For the purpose of classifying an account as inoperative, both the types of transactions - debit as well as credit transactions - induced at the instance of the account holder as well as a third party should be considered. Recently, the Reserve Bank of India (RBI) asked banks to track dormant accounts, so they can either be revived, or the balance can be transferred to a new account or the legal heirs. According to the RBI, there are 10 million dormant accounts in the banking system. These dormant accounts have unclaimed deposits of around Rs 1,700 crores.
The RBI has asked banks to make an annual review of such accounts and write to the account holders asking for reasons for the dormancy. The RBI wants banks to track account holders through the telephone or email, their legal heirs, the introducer, or employer in cases where letters remain unanswered.
Deposit accounts - savings and current - are treated as dormant (there is no credit or debit other than crediting of periodic interest or debiting of service charges) if there are no transactions in them for over two years.
If an account holder has moved from a locality, the bank should seek details of the new bank account to which the balance can be transferred. In case an account holder gives reasons for not operating the account, the bank should continue classifying the account as an operative account for one more year within which the account holder should operate the account.
However, if the account holder does not operate the account during the extended period, the bank can classify the account as inoperative.
FD interest counts as transaction
Where an account holder has given a mandate to credit interest from fixed deposits to a savings account, even if there are no other operations in that account, it should be treated as operative. The savings bank account can be treated as inoperative only after two years from the date of the last credit entry of interest from a fixed deposit. Since the interest on a fixed deposit is credited to a savings bank account because of a mandate, it is treated as a account holder induced transaction. As such, the account will be treated as an operative account as long as the interest is being credited to it.
Reactivating dormant account
You can have an account reactivated by contacting the bank, without paying any charges. Banks are expected to exercise due diligence in verifying the person's credentials before reactivating his account. The actual process of reactivation may vary from bank to bank. The bank may request a written application signed by all joint holders of the account, irrespective of operating mode, to reactivate it. All joint holders must comply with the Know Your Customer (KYC) norms currently in force, if they have not been complied with earlier.
The safest way to avoid it:
1) Keep only required number of bank accounts
2) Close all accounts which are no longer required
3) Ensure you make at least one transaction in your account regularly
