Dormant Account

Reviewed by Bhavana | Updated on Sep 23, 2021



If you have a savings or current account and if you have not made any transactions for more than 12 months through it, the account will be listed as an inactive account. In another case, if you don't make any withdrawals from the bank account for 24 months, it will then be listed as inactive.

For a long time, a dormant account had no operation other than posting interest. A statute of limitations does not usually apply to dormant accounts, meaning the owner or beneficiary may demand funds at any time.

When is an Account Considered Dormant?

According to RBI guidelines, an account becomes inactive if a client does not initiate transactions, such as withdrawal of cash from a branch or automated teller machine (ATM), payment by check, transfer of funds through internet banking, telephone banking, or ATMs.

Periods of dormancy differ by state as well as account form. Checking and investing accounts, brokerage accounts, pension fund accounts, and other financial resources accounts are all accounts that may become dormant.

To become inactive, the account owner must not have undertaken any action for a given period of time. Activities may include making phone or internet contact with a financial institution, logging into the account, or making a withdrawal or deposit. Periodic interest or dividends that are automatically reported on review, savings or mutual funds accounts are not considered to be operations.

The aim of the classification of inoperative accounts is to reduce the risk of fraud. Identification is made solely to bring attention to the increasing dormant accounts by the dealing staff. Therefore, transactions in such accounts can be tracked at a higher level from both a fraud prevention viewpoint and a Suspicious Transactions Report. The whole operation, however, remains unnoticeable to the consumer.

From a tax point of view, note that for every financial year you have to give details of all your savings and current accounts, including dormant and inactive ones, when filing your income tax return. According to the income tax laws, details of all bank accounts, except those held in India at any time during the previous year, which have been non-operational for over three years, should be provided in the IT returns.

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