Planning to close inactive or dormant bank accounts? Know these important points

We all have multiple bank accounts. However, a few might be not that important and it is prudent to close dormant or inactive accounts to prevent frauds. There are a few points that one should remember in this regard. Banks often charge an amount and there are some formalities of closing a bank account. Money9 gives you a brief description.

Identify the right account

If you have multiple bank accounts, first make it clear which accounts you want to close. Generally, when a person changes his/her job, the salary account is also changed. So, one should close those accounts first. But if you have multiple accounts, then first specify which accounts you want to close.

After leaving an organisation, one is usually required to open a new bank account. All banks have their own monthly average balance that needs to be maintained. As a result, to avoid having so many bank accounts and attracting non-maintenance charges, most people opt to close them, but they also face additional closure charges.

That is why closing of these accounts is required. But first decide which account you want to close and then proceed further.

Account closure charge

All banks generally charge an amount from the account holder. Banks don’t charge customers if the savings account is closed within 14 days of opening the account. However, account closure after 14 days, but before one year attracts some closure charges. Banks usually levy account closure charges ranging between Rs 500 to Rs 1,000 in case a savings or current account is closed after 14 days of opening the account.

India’s largest public sector bank State Bank of India charges Rs 500 plus GST from customers who close their savings accounts after 14 days of the opening but before one year. If the account is closed after completion of one year, there are no charges.

Account closing charges are levied by banks to recover the cost incurred by them while opening an account. Earlier, banks also used to charge around Rs 500 along with GST if a deceased person’s account was closed but now they have abolished it.

Closure formalities

To close a bank account permanently, the customer is required to visit the branch physically. At the branch, one needs to submit an account closure form along with account de-linking form, cheque book, credit card, debit card or any other belongings that he/she possessed.

In case of a joint account, the form or letter must be signed by both account holders. Also, do not forget to provide details of an alternative account to transfer the funds. If the balance in your account is less than Rs 20,000 then it can be paid in cash during the closure process.

Stop auto pay instructions

You need to de-link all auto debits and relationships, includes closing of any securities trading account linked with it. Mutual fund FD, RD, credit card all should be de-linked well in advance.

If your old bank account is linked to repaying monthly loan EMIs, or recurring deposit amount, you need to provide a new alternative bank account number for your lender. And after that you have to inform or add everywhere with the new account.

According to RBI data, Rs 18,381 crore is lying idle in different bank accounts till March 31, 2019. Approximately Rs 5 crore is lying idle in dormant savings accounts, which goes to education fund. Besides Rs 4,820 crore is idling in matured fixed deposits which are unclaimed till date, according to RBI data.

As per RBI norms, if an account holder doesn’t carry out a single transaction in a bank account for over 12 consecutive months, then banks can classify it as an inoperative or inactive account.

However, if the same account doesn’t record any transaction for more than 24 months or two years then it becomes a dormant account.