Idle bank accounts? Here’s how to close them safely and avoid trouble
Keeping finances organized is crucial but often challenging. Inactive bank accounts in India become inoperative after two years, requiring fresh KYC for reactivation, and funds may be transferred to the DEA Fund after ten years. Customers should review terms before closing an account.
It’s always a good idea to keep your finances simple and organized. Tidying up finances is, however, easier said than done. One of the biggest culprits behind financial clutter is having too many bank accounts. While it’s wise to maintain more than one for specific purposes, experts advise closing accounts rarely used or completely inactive. Withdrawing your own money from a long idle bank account could get unbelievably cumbersome.
This is mainly because after two years of no transactions, a bank account becomes inoperative. When that happens, all debit transactions are frozen, and a fresh KYC is required to reactivate the account. Even to close it, the account must first be reactivated by completing a fresh KYC once it turns inoperative.
If the account remains inoperative for 10 years, the funds are transferred from the bank to the Reserve Bank of India’s Depositor Education and Awareness (DEA) Fund (DEAF). Once this happens, recovering the money involves more paperwork.
How to close an account
Once you’ve decided to wind up an account, you can start the closure process. It’s quite straightforward and involves submitting an account closure form.
Some banks charge a small closure fee if the account is closed within a few days or months of opening. Each bank has its own terms and conditions that customers should review before proceeding.
Below are a few points to keep in mind:
- Check if there are any pending payments, recurring subscriptions, or EMIs linked to the account. Make sure to clear any pending dues or transfer them to another account.
- For joint accounts, the approval and signatures of all account holders are required for closure.
- If you have an unused cheque book, deposit it at the bank branch. It is advisable to shred any debit cards linked to the account.
- If the account has a negative balance, it cannot be closed. A negative balance can arise from charges such as those for not maintaining the minimum balance for that account. One has to first clear those dues before closing the account.
Adhil Shetty, chief executive officer of BankBazaar.com, said while filling out the account closure form, banks require the account-holder to provide details of the account where the remaining funds should be transferred. If the destination account is within the same bank, the transfer happens instantly, whereas transferring to another bank account may take a few days.
Bank branches might ask for the reason for the closure and may try to dissuade customers from closing their accounts, as it can affect the branch’s run rate of active accounts. Go ahead and get it closed it is no longer needed.
Closing an account is a permanent process, so make sure to read all the terms and conditions before taking a final call.
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