Bank accounts should not be let dormant

A bank account provides a place to park your funds for safekeeping while earning interest, but if you forget about your account for too long, your money may not be accessible when you need it. 

Circumstances like illness, death, divorce or just poor record-keeping can result in deposits being forgotten and left to lie dormant.

As of December 2013, a sum of Rs 5,124 crore was lying as unclaimed deposits (more than 10 years old) with scheduled commercial banks. The figure could be much higher now.

Have you left behind a trail of unused savings accounts when you changed jobs? Many individuals don’t close bank accounts that they no longer need. If a bank account has no activity for an extended period, it is flagged as ‘inactive’ or ‘dormant’ account.

Remember, in early 2014, an inactive account of a deceased NRI (non-resident Indian) was stolen to the tune of Rs 50 lakh, due to an employee misdemeanour.
What is dormant account? Why your account goes dormant? What happens to such accounts? How to avoid your account going dormant?

Inactive and dormant account
If there are no transactions in savings/current account for more than 12 months, the account becomes ‘inactive’. If the period extends for a further 12 months, the ‘inactive’ account is declared as ‘dormant’ or ‘inoperative’ account. System-generated transactions, such as interest credit, are not considered valid. However, dividend on stocks or the proceeds of your FD (fixed deposits) in your savings account are customer-induced transactions.

If the account is tagged ‘inactive’, debit card, cheque book or net-banking request will not be entertained. While filing your IT Return, all details of bank accounts including dormant and inactive ones need to be provided. 

Dormant account results from a variety of reasons:
*Some of them include: Death of a customer who failed to update his legal heirs the requisite information; failure to notify bankers in the event of change of address; the fact of the account-holder himself having forgotten about the existence of an account opened many years before; account opened in the name of a minor by the parents/grandparents, without subsequently informing the former; depositing money for the rainy day and then forgetting about it; senior-citizens affected by Alzheimer’s disease.

Beware of frauds
A dormant account is vulnerable to fraud, easy targets for phishing scams.  Such accounts are prone to be used for illegal transactions, money-laundering, any of which could land a bonafide customer in serious trouble. While frauds are reported even in operative accounts, it is no wonder such scams happen in inactive accounts.

In case of inactive accounts, the constituents do not come to know immediately that a trick has taken place in their account, as they do not track the account regularly.

Also, maintaining such accounts increases the overall expenses of the bank, as they need to maintain the database of dormant accounts.

How to keep the account active
Banks are supposed to ‘display the list of unclaimed bank deposits and inoperative accounts’ on their websites, as per the RBI guidelines.  Though banks need to play a pro-active role to contact and update the account-holders, it does not take away the due-diligence expected of the latter.

*Review your bank accounts: Verify the entries in the passbook/statement regularly.

This way, you can identify which accounts are close to becoming inactive. Ignoring a bank account for a long time can cost time, money and the accompanying agony.  
*Customer-induced transaction: Any transaction, debit or credit, induced by a customer in his account keeps an account active.  Such transactions include — Transaction through cheque, cash/cheque deposit, withdrawal/deposit through ATM, net-banking transaction, inward/outward bill, giving mandate to bank for crediting interest on FD to Savings account. 

*Standing instruction: Set up auto-transfers and scheduled monthly bill payments through your bank account. 

*Update change of address promptly: Keep your contact details updated on your bank accounts. When you notify change of address, ensure you get the acknowledgement to the new address. Thus, you don’t miss any notification from the bank. Failure to update can render account statements and sensitive documents land in wrong hands.  Fraudsters could use them for identity theft or siphon off funds.

*Share details with your family: Share bank details, wherever possible, with your close family members/legal heirs. Sit down and go over bank statements, insurance policies, investment records, etc.

*Close unwanted accounts: All of us have bank account, at times end up having many. Tracking of multiple accounts often breeds confusion. Destroy unused cheques and debit cards from inactive accounts.

*Talk to your banker: If you think you may have a dormant account, get it clarified. Though you have debit card and net-banking option, visit your branch periodically.

Don’t leave your money to fester in forgotten accounts. Similar exercises can be attempted to other unclaimed assets such as Employees’ Provident Fund, insurance claims, post office deposits, Income-Tax refunds, stocks and bonds and mutual funds.

(The writer is a former banker)