The Reserve Bank of India has laid out new guidelines to help customers with inoperative/dormant accounts. The regulations simplify the process of reactivating such accounts and eliminate any penalties.
According to the revised norms, if there are no customer-induced transactions in a savings or current account for two years, it is considered ‘inoperative.’
Additionally, banks cannot levy charges for the reactivation of this type of account and for non-maintenance of minimum balances during such dormancy. Even while inactive, savings accounts must continue to accrue interest. To reinstate the facility, customers must update their KYC, which has been made more flexible.
The account holders can undergo KYC through video-based verification, from any bank branch, or with the assistance of business correspondents. Once updated, a ‘small transaction,’ such as a minimal deposit or withdrawal, will reactivate the account.
The reactivation process is relatively simple but may involve a brief waiting period. Banks usually check documents and signatures, sometimes requesting fresh ones.
In the case of joint accounts, all holders may be required to present identification and sign off on the reactivation of the account.
If the account is inoperative for 10 years, the banks can transfer the balance to the RBI's Depositor Education & Awareness Fund.
Despite this, customers can reclaim their money. They need to reactivate their account and file a claim. Once verification is done, the amount will be returned to their bank account.
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The RBI's new guidelines, which come into effect from April 1, 2025, are surely a meaningful respite for account holders who have forgotten about dormant accounts or were not able to reactivate the accounts due to cumbersome KYC procedures.
Customers do not lose money in case a bank account is rendered dormant. They just need to update their KYC and make a small transaction. This restores full access to the bank account without incurring any penalties.