Inactive vs Dormant Account – What Every Account Holder Should Know

30^th Oct 2025...

Published By : Team 811

Key Takeaways

An account becomes inactive after 12 months of no customer-initiated transactions and dormant after 24 months of inactivity.
Banks mark accounts as dormant to safeguard against unauthorised access or misuse of idle funds.
Interest may continue to accrue on inactive accounts but can stop once an account turns dormant.
Dormant accounts may face restrictions on ATM, cheque, and online banking services until reactivated.
Reactivation requires a written request, valid KYC documents, and a small transaction such as a deposit or withdrawal.
If left unused for several years, the balance may be transferred to the Depositor Education and Awareness Fund (DEAF) managed by the RBI.
Regular transactions, updated contact details, and use of digital channels help keep accounts active and fully functional.

A savings account is often the first step towards managing money independently. It’s where your salary is credited, bills are paid, and financial goals begin. However, when an account is not used for an extended period, it may slip into an “inactive” or “dormant” status. While both sound similar, the implications are slightly different, and knowing this difference can save you inconvenience later.

Let's understand what is dormant account, how it differs from an inactive account, and how you can keep your account active to ensure smooth banking.

Defining Dormant and Inactive Accounts

In simple terms, a dormant account refers to a savings or current account that has had no financial transaction for more than two years. According to banking regulations, if there are no customer-initiate transactions, such as deposits, withdrawals, fund transfers, or cheque clearances for over a year, the account becomes inactive. If it remains unused for another year, it turns dormant.

Banks classify these accounts to comply with regulatory guidelines and ensure security for customers who may have forgotten about an old account or stopped using it. Once an account is labelled dormant, certain facilities such as online banking, debit card usage, or cheque issuance may be temporarily restricted until it is reactivated.

Key Differences between Dormant and Inactive Accounts

Aspect	Inactive Accounts	Dormant Accounts
Account status and implications	They may be subject to maintenance or other fees charged by the bank. These fees are meant to cover administrative costs of maintaining the account, even though it has limited activity.	Banks may take additional steps such as freezing account funds, limiting access, or requesting specific documentation for reactivation.
Interest accrual and fees	Interest continues to accrue as per the account’s terms and conditions. However, maintenance or other service fees may still be deducted from the balance.	Interest accrual may stop entirely. Banks can also levy additional fees specific to dormant accounts or charge reactivation fees when you wish to access funds again.
Unclaimed funds	Funds are not transferred or treated as unclaimed. The focus remains on maintenance or administrative charges, if any.	If a dormant account remains inactive for a long period, banks may need to transfer the balance to the Depositor Education and Awareness Fund (DEAF) managed by the Reserve Bank of India.
Reactivation process	To reactivate, you generally need to perform a transaction such as a small deposit or withdrawal, or contact the bank to confirm continued use.	The reactivation process can be slightly more detailed, requiring submission of a written request, KYC documents, and identity verification before restoring access.

Why Accounts Become Dormant

There are many reasons why a once-active savings account may turn dormant. Some people open multiple accounts for salary, savings, or travel and stop using one over time. Others may shift cities or jobs, leaving behind old salary accounts. Even a simple oversight like forgetting to maintain a minimum balance or missing regular deposits can lead to inactivity.

Banks take this step mainly to protect customers. When there are no regular transactions, the chances of unauthorised activity or identity misuse rise. Hence, classifying such accounts as dormant adds an extra layer of activity.

Also Read: What Is A Dormant Account?

How to Reactivate a Dormant Account

The good news is that reactivating a dormant account is simple. Banks are required to restore full functionality once you verify your identity and show intent to use the account again. Here’s how you can do it:

Visit your bank branch: Submit a written request to reactivate the account.
Provide KYC documents: Carry valid ID proof and address proof for verification.
Complete a small transaction: Deposit or withdraw money once your account is reactivated to ensure it stays active.
Use digital channels: In some banks, you can reactivate an account online by updating KYC and initiating a verified transaction.

After verification, your account status changes back to active, and all facilities such as net banking, debit card, and mobile banking resume.

Also Read: How To Reactivate An Inactive Or Dormant Savings Account?

How to Prevent Your Account from Becoming Dormant

Maintaining a few small habits can prevent your account from slipping into inactivity.

Make at least one transaction every few months, even if it’s a small transfer.
Keep your contact details updated with the bank to receive alerts and reminders.
Use your debit card for small payments to ensure periodic activity.
If you have multiple accounts, decide which ones you need and close the rest responsibly.

By keeping your account active, you ensure uninterrupted access to funds and avoid unnecessary paperwork later.

Importance of Staying Informed

An account turning dormant is not a penalty but a precaution. However, staying aware helps you act before restrictions apply. Reviewing your account statements and digital banking notifications regularly can help you spot inactivity early.

Many people rediscover old accounts years later while reconciling documents, only to realise they’ve become dormant. Knowing what a dormant account is ensures you understand what steps to take if you ever face such a situation.

A Simple Step for Banking

Having an account labelled as dormant is avoidable with a little attention. Make it a habit to log in to your account periodically, transfer a small amount, or use digital banking services. Staying active keeps your funds accessible and your banking experience smooth.

Understanding the difference between inactive and dormant status helps you manage your finances better and avoid last-minute inconvenience. Whether you hold one account or several, a quick check-in every few months can ensure your savings stay active and within reach whenever you need them.

With modern digital accounts like Kotak 811, you can easily monitor balances, make instant transfers, and keep your savings active without visiting a branch. Small steps like these ensure your account remains in use and your money always works efficiently for you.

FAQs

1. Is dormant the same as inactive?

No, an inactive account is one with no customer-initiated transactions for 12 months, while a dormant account shows no activity for 24 months. In simple terms, a dormant account is an inactive account that has remained idle for a longer period.

2. How long is a dormant account valid?

A dormant account remains valid indefinitely, meaning your money stays safe even if you haven’t used the account for years. However, you must reactivate it by verifying your identity and making a transaction to use it again.

3. What are the new RBI guidelines for dormant account?

According to the RBI, banks must monitor inactive accounts closely, send alerts before classifying them as dormant, and conduct periodic KYC verification. Banks are also required to restore full access once the account holder completes reactivation formalities.

4. How long can a bank account be dormant before it is closed?

Banks usually do not close dormant accounts automatically, but they may freeze transactions after 24 months of inactivity. The account can be reactivated anytime by submitting updated KYC documents and performing a small transaction.

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.