If you have multiple savings account, it may so happen that you may completely forget an account for few years until you found your old ATM or cheques.
If there is no transaction in account for two years, other than interest credit in savings/current account, the bank will classify it as dormant or inoperative account.
Once the account turns dormant you cannot operate account like money cannot be withdrawn, cheque clearance etc.
Banks are also advised to ensure that the amounts lying in inoperative accounts ledger are properly audited by the internal auditors / statutory auditors of the bank.
What happens to interest on fixed deposits?
There may be instances where the customer has given a mandate for crediting the interest on Fixed Deposit account to the Savings Bank account and there are no other operations in the Savings Bank account.
Since the interest on Fixed Deposit account is credited to the Savings Bank accounts as per the mandate of the customer, the same should be treated as a customer induced transaction.
In such cases, the account will be treated as operative account as long as the interest on Fixed Deposit account is credited to the Savings Bank account.
The Savings Bank account will be treated as inoperative account only after two years from the date of the last credit entry of the interest on Fixed Deposit account.