When you allow your bank account to gather dust for a year, your bank will qualify it as inactive. However, if you still fail to carry out an activity on the account for an additional 12 months, your bank will consider it dormant and close it. When that happens, can you withdraw the funds from the account?
Once an account is classified as dormant, it’s impossible to withdraw money, change your signature, request a new ATM, or change your address. You’ll have to visit your bank and reactivate the account to do any of these things.
Have you been trying to withdraw funds from your old account, all to no avail? Perhaps it’s because it has been qualified as dormant by your bank. In this post, I explained the possibility of withdrawing money from a dormant account.
What Happens if Money Is Transferred to a Dormant Account?
How to Withdraw Money From a Dormant Account?
When it comes to our bank accounts, there are no certain rules and regulations that we all must adhere to. One of the main rules is that we should perform some activity on our accounts every few months.
A bank account with zero activity for a long time will go dormant. If the bank cannot make a connection with account holders, their accounts will be considered inactive. Let’s delve into what a dormant account is.
A dormant account is a bank account that has been inactive for 12 months. The activities that help keep your account active are deposits, money transfers, withdrawals, or even logging into the account.
To stop the account from becoming dormant, you must carry out transactions like check transactions, cash withdrawals, outward bills, cash deposits, etc., at least once each six months. Usually, banks convert accounts with zero activity for long periods into inoperative or dormant accounts to mitigate the risk of fraud.
Dormant Bank Accounts—Treatment and Consequences:
Having understood the meaning of a dormant account, it’s high time you understood its implications. The way various financial institutions treat the term varies. The longer an account has stayed inactive, the higher the annual service fees. If a dormant bank account has no balance, the bank has a right to close it after some time.
A check book will be offered to you when an account is considered dormant. Plus, requests for the following are impossible:
- Renewing of ATM/ debit card
- Signature modification if required
- A change of address
- No transactions are possible either via internet banking or a branch of the bank
- Including or deleting a joint holder
The Escheatment Process of Dormant Accounts
Financial institutions, such as banks are charged with reporting unclaimed assets to the state after some time. The escheatment statute gives the government the right to every asset of an account holder when it has been left fallow.
The states need to keep records of all the unclaimed properties and ensure that they are returned when their respective owners come to claim them. If an owner wants to claim ownership of an asset, he must file a claim application. After the escheatment process is done and the property is still unclaimed for a long time, the state can borrow it and invest in public projects.
How Does a Dormant Account Work?
There is a gradual process that occurs when an account becomes dormant. For bank accounts, it usually looks like this, although exact time frames vary:
- You don’t make any deposits, withdrawals, or transfers to your financial account for 12 months
- Your financial institution flags your account as inactive and later starts charging you a monthly inactivity fee
- You still don’t post any activity to your account or make any transactions for an additional 24 month
- Your financial institution then changes your account status from “inactive” to dormant.” Finally, it shuts your account and transfers the funds to the state.
Throughout the entire process, your financial institution is legally required to try to reach out to you, which is why it’s crucial to update your contact information. If they cannot contact you, they’ll send one last notice before sending everything to your state.
Withdrawing Money From a Dormant Bank Account: Is It Possible?
If you don’t perform any activity on your account for 12 months, it becomes inactive. If it stays that way for an extra 12 months, your bank will consider it dormant. When that happens, you won’t be able to make withdrawals, deposits, change of address, debit card renewal, modification of signature, etc. You’ll need to visit the bank in person to reactivate the account.
How Long Does It Take for a Bank Account to Close for Inactivity?
How to Reactivate a Dormant Account?
Banks cannot levy extra fees while reactivating a dormant bank account based on RBI rules. To reactivate a dormant account, you must submit a finished application form to the bank stating why the account was abandoned. You must visit the bank physically to reactivate the account. Ensure you carry a valid residence and identity proof along.
As soon as the process is finished and after the bank’s confirmation, you should make at last one financial transaction in your account. Some of the essential transactions are:
- Deposit money using a check
- Deposits of cash into your account
- Make an online transaction in your dormant account
- An ATM can be used to initiate a withdrawal or deposit
Typical transactions are essential to ensure that your account remains active. Make sure you use all your bank accounts regularly. You can also stop your account from becoming dormant by carrying out activities like initiating a transaction or withdrawing cash, etc.
