What is a Dormant Account?

Posted on Friday, March 21st, 2025 | By IndusInd Bank

If you have multiple bank accounts, chances are you may not use a particular account often. When an account is not used for an extended period, it may become dormant. 

Dormant accounts lead to limited access to banking services, additional fees, and security risks. Understanding the meaning of a dormant account and how to prevent it is essential for maintaining your financial health. 

What is a Dormant Account?

Let’s understand what a dormant account is with the help of the following points: 

• A dormant account is a bank account that has not been active for a specified period. The duration for considering a bank account as dormant depends on the bank’s policy. It can range from 12 to 24 months. 

• The bank will mark an account as dormant if there are no deposits, withdrawals, or any other transactions for the specified duration. The bank may exclude transactions such as interest credits or service charges. Some also refer to it as an inoperative account. 

• These accounts as marked dormant to protect against unauthorised access, fraudulent activities, and to comply with regulations. 

Now that you know what a dormant account is, let’s see why one must avoid letting their accounts become dormant. 

Why You Should Not Let Your Account Become Dormant

Allowing your account to become dormant can have several negative implications:

1. Limited Access

Dormant accounts often have restricted access. This means that you may need to reactivate the account through a lengthy process to use it again.

2. Service Charges

Some banks may impose additional service charges on a dormant bank account. This can reduce your account balance over time.

3. Security Risks

Dormant accounts are more susceptible to fraudulent activities as they are not monitored by the account holder.

4. Credit Score Impact

In some cases, having a dormant account may affect your credit score, especially if the account incurs unpaid fees.

It is crucial to keep your account active to avoid these issues. Ensure to make regular transactions. You can also inform the bank of your intention to keep the account open even if you may not use it too often.

If you do not use the account for a particular duration, the bank may term it as an ‘inactive account’ rather than a dormant one. Read on to understand the difference between both.

Is a Dormant Account the Same as an Inactive Account?

The following points describe the key difference between an inactive and dormant account: 

• Inactive Account: An inactive account has not seen any transactions from the holder for a shorter period, such as 6 to 12 months. An inactive bank account is the preliminary phase before an account becomes dormant. Banks may notify account holders when their accounts are approaching inactive status.

• Dormant Account: A dormant bank account is one that has not seen any activity for a more extended period like a year or two years. At this stage, the account is subject to more stringent restrictions and may require reactivation processes.

The main difference between a dormant bank account and an inactive bank account lies in the duration of inactivity and the level of banking restrictions.

Also Read: Why is it Important to Maintain Minimum Balance in Savings Account?

Conclusion

One must efficiently manage their bank accounts to prevent them from becoming dormant or inactive. Use your accounts on a regular basis, even for minimal transactions. This keeps them active and allows you to enjoy the full range of banking services on offer. 

For a hassle-free banking experience, open a new account with IndusInd Bank. IndusInd Bank offers various savings accounts designed to meet your needs, ensuring you have easy access to your funds with robust account management services.

Open a bank account with IndusInd Bank today! 

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.