In a significant regulatory move, the Reserve Bank of India (RBI) has directed all banks to take proactive measures to streamline the activation of inoperative accounts. This policy update, issued in December 2024, comes amid growing concerns about the vast number of dormant bank accounts lying unused in the Indian banking system. With over ₹42,000 crore lying unclaimed as of March 2023 in various dormant accounts — including savings, fixed deposits, and provident funds — the RBI’s initiative signals a broader push toward financial inclusion, transparency, and customer re-engagement.
What Is an Inoperative Account?
According to RBI guidelines, a savings or current account becomes inoperative if there have been no customer-initiated transactions for two consecutive years. These accounts, while not closed, are treated with caution by banks, often imposing restrictions on operations to prevent fraud. Reactivating such accounts has historically required physical visits, lengthy documentation, and, in many cases, was a cumbersome experience — particularly for elderly citizens, NRIs, or people who have migrated between cities.
The Regulatory Push
In December 2024, the RBI issued a fresh directive asking banks to simplify this process through digitization, awareness campaigns, and seamless Know Your Customer (KYC) updates. Banks must now provide multiple channels — including online and mobile platforms — to update KYC documents and request account reactivation.
Further, financial institutions are mandated to:
- Notify customers well in advance before marking an account as inoperative.
- Share step-by-step guidelines through SMS, email, and branch notices.
- File quarterly reports on reduction in dormant accounts via the DAKSH compliance portal.
The RBI also recommended a customer-centric approach, emphasizing the need to treat dormant account holders as potential clients who may have lost access, not interest.
Why It Matters
The volume of inoperative accounts in India is not a small figure. As per RBI data, over 18 crore bank accounts were inactive as of March 2023. Many of these accounts contain small but significant balances, often left unclaimed due to a death in the family, a change in residence, or simply poor financial literacy.
For example, 68-year-old retired teacher Shanta Menon from Kochi was recently able to reclaim her late husband’s ₹1.2 lakh fixed deposit after struggling for over a year. “The local bank insisted I visit in person and update all documents manually. After the new RBI circular, they offered me the option to verify my ID through a video call and update my KYC through the app,” she said. This is exactly the kind of relief the RBI intended to create.
Challenges in the Current System
Before the new directive, several challenges plagued customers:
- Lack of awareness that an account had become inactive.
- Inability to visit branches physically, especially in rural areas.
- Reluctance from banks to process reactivations due to compliance burdens.
- Tedious documentation, including outdated KYC protocols.
The RBI’s new measures target these barriers by insisting on digital-first solutions and accountability from banks.
Technology as the Enabler
Banks are now leveraging Aadhaar-based eKYC, OTP-based verification, and AI-powered chatbots to simplify reactivation processes. Public sector banks like SBI and Punjab National Bank have already begun allowing KYC updates through mobile apps. Private players such as ICICI and Axis Bank have introduced automated email alerts for impending dormancy and provide online portals to request account activation.
This transition toward digital KYC is in line with the RBI’s broader Digital India objectives and its 2025 Vision Document for financial sector reforms.
Account Aggregators May Play a Role
The Account Aggregator (AA) framework — launched to consolidate financial data with customer consent — could further aid in identifying dormant accounts across banks. With customer permission, fintechs and banks may soon be able to inform users of inactive accounts held under their PAN, enabling easy monitoring and reactivation.
RBI’s Dual Purpose: Customer Protection and Systemic Cleanup
The RBI’s move also aims to clean up outdated customer records in the banking system. Dormant accounts, if left unmonitored, are vulnerable to internal fraud or impersonation. Streamlining activation ensures accurate KYC compliance, reduces operational risks, and prevents misuse.
Moreover, with the RBI actively pushing for the transfer of unclaimed amounts to the Depositor Education and Awareness (DEA) Fund, ensuring that legitimate claimants have access to their funds is now a key regulatory focus.
What Customers Should Do
For users, the RBI’s new directive means:
- Regularly checking account status and updating contact information.
- Responding promptly to bank alerts about account inactivity.
- Utilizing digital KYC facilities provided by banks.
- Contacting the bank’s grievance redressal mechanism if delays persist.
Importantly, dormant accounts can still earn interest (in the case of savings or term deposits), and customers retain full ownership of the funds. The idea is not to let them slip into oblivion.
Conclusion
The RBI’s decision to simplify the reactivation of inoperative accounts is a progressive step toward customer empowerment and system transparency. It reflects a mature regulatory stance that balances compliance with user convenience. As banks begin to implement these measures in earnest, millions of account holders — especially the elderly, low-income, and digitally underserved — stand to benefit from renewed access to their own financial resources. It is now up to banks and consumers alike to act on this opportunity and ensure no dormant account is left behind.
