Dormant Bank Accounts: What Happens If Your Account Remains Inactive for 2 Years, and Is Your Money Safe?

Many people today maintain multiple bank accounts, but often some of them remain unused for years. According to Reserve Bank of India (RBI) guidelines, if there is no transaction in your account for a specific period, the bank may classify it as inactive or even dormant. While the money in such accounts remains safe, customers face restrictions in using banking services until reactivation. Here’s a detailed look at what dormant accounts are, how they differ from inactive accounts, what risks are involved, and how to reactivate them.

When Does an Account Become Dormant?

As per RBI rules, if no customer-initiated transaction—such as deposits, withdrawals, fund transfers, or cheque activity—takes place in a savings or current account for 12 consecutive months, the account is marked as inactive.

If inactivity continues for 24 months (two years), the account is officially classified as a dormant account.

It is important to note that activities such as interest credits, bank charges, or automatic service deductions do not count as customer transactions. Only direct actions by the account holder are considered valid activity.

Inactive vs Dormant Account: Key Differences

• Inactive Account (12 months of no activity):

  • Considered partially operational.

  • Customers can still check account balance, download statements, or request interest certificates.

  • However, some transactions may be restricted.

• Dormant Account (24 months of no activity):

  • Almost all services are blocked.

  • Debit cards, ATM withdrawals, UPI transactions, net banking, and mobile banking stop working.

  • Auto-debits such as EMIs, SIPs, or insurance premium payments may fail.

  • Customers stop receiving SMS/email alerts.

  • The account can only be reactivated after proper verification.

In the event of the account holder’s death, funds from both inactive and dormant accounts are released to the nominee, provided one has been registered.

How to Reactivate a Dormant Account

Reactivating a dormant bank account requires the customer to complete certain formalities:

1. Visit the home branch of the bank and submit a written reactivation request.

2. Provide valid KYC documents such as proof of identity and address.

3. In some cases, banks may ask the customer to perform a small transaction to re-establish activity.

4. Once the process is complete, the account is restored to active status.

RBI clearly states that banks cannot charge any penalty for reactivating an inactive or dormant account. The balance in the account continues to earn interest as per applicable rules.

Is the Money Safe in a Dormant Account?

Yes. Funds lying in inactive or dormant accounts remain completely safe. The main purpose of marking an account as dormant is security—to prevent unauthorized use or fraud in accounts that are not regularly monitored by customers.

However, while the money is safe, customers cannot access it until the account is reactivated.

What If an Account Remains Dormant for 10 Years?

If an account remains unclaimed and inactive for over 10 years, banks are required to transfer the balance along with accrued interest to the Depositor Education and Awareness Fund (DEAF) maintained by RBI.

The good news is that even after this transfer, account holders or their nominees can claim the money anytime by approaching the bank with the necessary documents.

How to Prevent Your Account from Becoming Dormant

The simplest way to avoid your account being classified as dormant is to ensure regular activity:

• Perform at least one small transaction every few months (even a ₹10 UPI transfer is enough).

• Link the account to auto-debit facilities like loan EMIs, insurance premiums, or SIPs.

• Use it for periodic bill payments or fund transfers.

• Even checking your balance or updating your passbook occasionally helps maintain activity.

If you no longer need a particular bank account, the most practical solution is to close it formally. This not only prevents dormancy but also helps avoid minimum balance charges that some banks impose.

Bottom Line

A dormant account does not mean lost money—your funds remain secure under RBI rules. But you lose access to banking services until the account is reactivated. To avoid inconvenience, make sure to keep your accounts active through small periodic transactions, or close unused accounts altogether. This way, your finances stay accessible, secure, and hassle-free.