A savings or current account generally becomes inoperative when there is no customer-initiated activity for more than two years. It can usually be reactivated free of charge by completing identity verification and submitting the required request.

As per the Ministry of Finance, India had ₹74,580.45 crore in unclaimed deposits as of 31 March 2025, compared with ₹60,610.10 crore a year earlier. (Sansad) This sharp rise shows how easily money can remain forgotten when people change addresses, open multiple accounts or fail to update their nominees and contact details.

An inactive account does not automatically mean that the money is lost. Therefore, it is important to understand a dormant account, applicable rules and reactivation procedure to help account holders regain access without unnecessary delay.

• What Is a Dormant Account?

For people wondering what a dormant account is, it is commonly used to describe a savings account or current account that has not recorded any customer-initiated transaction for an extended period.

Under the applicable regulatory rules, a savings or current account is classified as an inoperative account when there has been no customer-initiated transaction for more than two years. The terms dormant account and inoperative account are therefore often used interchangeably in everyday banking.

The important point is that inactivity is measured using customer-initiated activity, not merely entries made automatically by the account provider.

For example, periodic interest credited to a savings account does not keep the account active because it is a provider-initiated entry.

• Which Activities Keep a Bank Account Active?

A transaction does not always have to involve depositing or withdrawing money. Both financial and certain verified non-financial activities may be treated as customer-induced transactions.
Financial transactions
These may include:

1. Cash deposits or withdrawals
2. ATM and debit card transactions
3. Cheque payments
4. Online fund transfers
5. UPI or other electronic payments
6. Standing instructions authorised by the customer
7. Refunds, dividend credits or investment proceeds
8. Direct Benefit Transfer credits

Non-financial transactions
Certain activities completed through secure channels may also count, such as:

1. Logging in successfully to internet or mobile banking
2. Checking the balance through a verified channel
3. Requesting a cheque book or card
4. Updating the transaction limit
5. Adding or changing a nominee
6. Completing a KYC update

Such activities generally need two-factor authentication and must create a verifiable audit trail.

• When Does an Account Become Inoperative?

Accounts are generally reviewed when there has been no customer-induced transaction for more than one year. The account holder may receive an alert through a letter, email or SMS explaining that the account could become inoperative if no eligible activity takes place during the following year. 

If there is still no customer-initiated activity for over two years, the account may be classified as inoperative. (RBI)

The classification applies separately to each account. Therefore, using one account regularly does not automatically keep another account held by the same person active.

Accounts opened specifically for government benefit payments or scholarships may receive different treatment so that eligible payments are not blocked only because of inactivity. Additional verification may still be required before withdrawals are permitted.

• Dormant Account vs Unclaimed Deposit

A dormant or inoperative account should not be confused with an unclaimed deposit.
 

Balances that remain unclaimed for ten years are transferred to a regulatory depositor-awareness fund. However, the account holder or an eligible claimant does not lose the right to the money merely because it has been transferred.

• How to Activate a Dormant Account?

Those who don't know how to activate dormant accounts can usually follow these steps.
1. Contact an available branch
The account holder can approach the home branch or another branch that offers the service. Identity verification may also be completed through video-based identification where this facility is available.
2. Complete the activation request
Ask for and submit the dormant account activation form or the prescribed written request. The exact format and document list may vary according to internal procedures.
3. Submit updated KYC documents
The account holder may need to provide an officially valid identity document, address proof, a recent photograph, and a Permanent Account Number or the applicable declaration.
Original documents may be required for verification. The account provider may also ask the customer to update their mobile number, email address, nominee and signature.
4. Complete identity verification
Customer due diligence is necessary before the account is restored. This step helps confirm that the person requesting access is the genuine account holder and reduces the risk of fraud.
5. Wait for confirmation
Once a complete application and valid documents have been received, the activation request should generally be processed within three working days. 

• What Happens If the Account Holder Has Died?

The nominee or legal heir can submit a claim when the original account holder is deceased. The claimant may be asked to provide:

1. Death certificate
2. Identity and address proof
3. Claim application
4. Proof of nomination or legal entitlement
5. Additional documents depending on the balance and account structure

Where a valid nomination exists, the claim process is generally simpler. Without a nominee, legal documents may be required to establish the claimant's right to the funds.

• How Can You Prevent an Account from Becoming Dormant?

Account holders can reduce the risk of inactivity by carrying out an eligible transaction periodically. They should also:

1. Keep their mobile number, email and address updated
2. Register or review nomination details
3. Check all accounts at least once a year
4. Close accounts that are no longer required
5. Respond promptly to inactivity alerts
6. Inform family members about important accounts and deposits

Using secure digital channels for balance enquiries, service requests, or KYC updates may also help maintain activity, provided the transaction meets the prescribed conditions.

Also Read - Difference Between Savings Account and Current Account

• Keep Your Bank Account Active and Accessible

A dormant account is not a closed account, and the money in it does not disappear. It is a protective classification applied after prolonged customer inactivity.

Understanding the difference between a dormant account, an inoperative account and an unclaimed deposit can make the recovery process easier. Regular account reviews, updated KYC details and an active nomination can help ensure that savings remain accessible to the account holder and their family.

• FAQs

1.    Can money be deposited into a dormant account?
Credits may be received, but withdrawals or debit transactions are generally restricted until the account is reactivated.
2.    How long does dormant account activation take?
A complete activation request should generally be processed within three working days. (RBI)
3.    Is there any fee for dormant account activation?
No, RBI doesn't permit any charges for activating an inoperative account. (RBI)
4.    Does interest stop when an account becomes dormant?
No, applicable savings-account interest should continue to be credited regularly.
5.    Can a dormant account be activated from another branch?
Yes, KYC updation for activation should be available at non-home branches as well.

Disclaimer: The article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of The South Indian Bank Ltd. or its employees. The South Indian Bank Ltd and/or the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial/non-financial decisions based on the contents and information’s in the blog article. Please consult your financial advisor or the respective field expert before making any decisions.