Difference Between an Inactive and Dormant Bank Account

Do you wish to reactivate your bank account after a long time but are unsure whether it is inactive or dormant? Both the terms’ inactive’ and ‘dormant’ can seem similar, but they have different meanings and distinct reactivation processes. In order to find out what category your bank account falls in, read this blog till the end. We will discuss the meaning, differences and steps you should take to use your account again.  

Meaning of inactive account

If you haven’t made any transactions, such as withdrawals, deposits or transfer of funds, for a period of 12 months, then your account is considered inactive. Despite non-activity, your account remains open and accessible. Banks also consider salary credit as an activity, so if you want to avoid making your account fall into this category, make sure you are making scheduled transfers from your salary account to your savings account, in case you have two accounts.  

Meaning of dormant account

A dormant account refers to a bank account with no activity for 24 months. When your account becomes dormant, you cannot make any transactions, such as withdrawals, deposits or other activities. This can pose a challenge to access or manage your funds. 

Key differences between inactive and dormant bank accounts

What is the specific process to reactive dormant bank accounts?

Here are the steps to reactive a dormant bank account:

1. Submit a written application to the bank. It should contain the account number and holder’s name. If it is a joint account, the details and signatures of both would be required to initiate the process. 
2. Banks would ask you to submit your KYC (Know Your Customer) documents. This would include a PAN card, proof of current address, and other identity documents. 
3. If you do not intend to use the account, you can close the account by submitting a closure form, along with unused cheque leaves and your passbook. You might also be asked for KYC documents, so keep them handy.     

Note: There aren’t any extra fees or charges for reactivating the account. 

Why should you keep your accounts active?

The process to open an account has become more convenient than ever, whether it is opening a zero balance account online or a traditional savings account. With this ease, having multiple savings accounts and leaving a few of them unused is becoming common. However, it would help if you did not leave them unused for the following reasons:

1. Denied access: When your account is dormant, banks may not allow you to access your funds. So, you may be unable to make transactions or avail of bank services until you activate your account. 
2. Penalty charges: Banks typically impose penalties, which involve a deduction from your account balance. Leaving an account undisturbed may result in a loss of funds due to these penalties. To avoid these charges, you should use your savings accounts. 
3. Loss of investment opportunity: With a savings account, you can invest in many instruments. High interest rates are a secure pathway to grow your money over time. Therefore, you should keep your bank account to take advantage of these investment opportunities.
4. Missing out on beneficial features: A dormant account doesn’t let you enjoy benefits like overdraft facilities, online banking services, etc. So, if you want to operate your account anywhere, anytime, with digital services, you must keep your bank account active.

Endnote

To keep your bank account active, you should make transactions regularly, be it withdrawals, deposits or transfers. You can further make schedule transfers at specific intervals and automate savings to accumulate and grow your money. Many banks, like Kotak811, offer the convenience of mobile apps that send out alert notifications to prevent inactivity. So, make sure you have the alerts turned on. This way, you can stay informed all the time.    

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