An account is termed as dormant or inoperative if it is not operated for more than two years. This rule is applicable for savings as well as current accounts.
Note that the service charges levied by the bank or interest credited by the bank will not be considered as a transaction for the purpose of determining an operative account.
In cases where there is a dividend on shares is credited to the account, the same will be treated as a customer induced transaction. In such cases, it is considered as the operative account as it is a customer induced transaction.
Also read: 7 reasons why banks freeze accounts
Savings Bank account can be treated as inoperative account only after two years from the date of the last credit entry of the dividend, provided there is no other customer induced transaction.
How To Activate Dormant Bank Account?
The procedure differs and may vary with banks. However, one has to visit a bank and submit a written application along with bank passbook, cheque book with a valid reason for not using an account.
If the account is operated jointly, the application for reactivation would have to be made jointly.
The bank may ask you to submit fresh set of documents as fresh KYC along with:
1) Recent colour passport size photo
2) Copy of valid photo ID document
3) Copy of valid address proof documents
There are no charges for activation of an inoperative account.
What happens when an account is in dormant state?
The account holder will not be able to do any transaction through ATM, net banking or Phone banking as the bank would have deactivated such services. However, interest on the balance will be credited to the account even when the account is in a dormant state.
The banks segregate the operative and inoperative accounts in order to monitor such accounts and reduce the risk of frauds etc.
Operation in such accounts will be allowed after due diligence depending on the risk category of the customer. Due diligence procedure includes ensuring the authenticity of the transaction, verification of the signature and identity etc.