If you have a bank account whether for share dividends or investment purpose, it is necessary to carry out transaction once a in a while on such unused bank accounts. If you don’t then you have to get it reactivated and might have to pay charges (if any). You should withdraw cash at a branch or an ATM, make a cheque payment, and transfer funds through either of the banking channels at least once a year. However most of the big banks like SBI, HDFC Bank or ICICI Bank does not charge any penalty, but Barclays Bank charges a penalty of Rs 250, excluding service tax. If the bank account is inactive/dormant account then you can’t use the account or any banking service linked to it.
If for more than a year you don’t carry out any transaction or with draw money from your account through ATM, branch or internet then bank terms such account as inactive. If the account is kept unused for almost two years, such bank accounts are termed as ‘dormant’. Once the account is classified as ‘inactive’ you cannot operate it through the ATM/phone or internet banking as bank systems do not identify inactive accounts. To get the account reactivate these accounts the customer has to go the bank branch for this.
However there is no standard norms among the banks regarding the time period after which bank classify the account dormant or inactive. HDFC Bank classifies an account as inactive if it’s not operated for a year. On the other hand ICICI Bank has set 15 months whereas foreign banks like Citibank, HSBC and Standard Chartered Bank classifies an account inoperative if no transaction is done for a period of two years. System-generated debits (default charges or debit interest) as withdrawal don’t qualify as a transaction.
As per the IBA model policy on bank deposits, banks have the right to transfer such unused accounts to a separate dormant/inoperative account status. But before freezing the accounts bank has to inform the customer and also bank have to inform about all the relevant charges applicable on such dormant/inoperative accounts. Also, the Banking Codes has clarified that bank has to give the relevant information at the time of opening the account. The bank also has to inform the customer three months in advance before it freezes the account.
The account can be reactivated by going to the branch for a withdrawal transaction using cheque book. Account can also be reactivated through internet banking you can instruct the bank to pass Re 1 debit and credit entries into your account. If your account have been ‘inactive’ for more than a year, you have to give an application for activation of the account signed by each of the account holders. The other documents required are photo identity like passport or driving license for each account holder. All account holders (including joint account holders) have to go to branch and take along the documents and the cheque book with them to get the account activated.