Page 58 - Banking Finance October 2025

FEATURES

Need to revive dormant bank

accounts

R ising dormant accounts pose a concern. If the industry. Funds in these dormant accounts are safe, as
customerinitiated transactions haven't occurred in
no debit is allowed until the reKYC process is completed and
the past two years in a deposit account, it is
classified as inoperative or dormant. No customerinitiated the accounts are properly activated. Thus, increasing
dormant accounts in banks is of concern but not alarming.
debits are permitted in such accounts unless reKYC is Similar trends are observed in debit card usage. Out of 990
completed and the account is revived. million debit cards, approximately 200250 million remain
unused.
These dormant accounts are more vulnerable to fraud and
misuse because their activity often goes unnoticed by the Among the many reasons for the increase in dormant
accountholder. They can also be misused as mule accounts accounts, the most significant is the lack of financial and
to veil money laundering activities. Additionally, the bank digital literacy among account holders who were mobilised
misses potential opportunities for new deposit inflows. during PMJDY account opening camps drawn from the
Therefore, an increase in the number of inoperative hinterland. Of the 56 crore PMJDY accounts, 67 per cent
accounts could heighten the bank's operational risks. are from rural/semiurban areas. Similarly, out of the total
265.24 crore deposit accounts in the banking industry, 59
After 10 years of the Pradhan Mantri Jan Dhan Yojana per cent come from rural/ semiurban regions.
(PMJDY) scheme, many accounts now need reKYC. As of July
30, 2025, the banking system has 56.04 crore accounts Banks can adopt the hubandspoke model to accelerate
under the PMJDY scheme, holding a total of Rs. 2.62 trillion revival of dormant accounts. Branches and back offices
in deposits. Of these, nearly 13 crore accounts, which should act as hubs, with business correspondents, financial
account for 23 per cent, have become dormant, raising literacy, and credit counselling (FLCCs) centres functioning
concerns. Recently, in its monetary policy, the RBI as spokes to motivate target deposit accountholders to
reactivate their accounts. Deceased accounts should be
emphasised the need for banks to take specific steps to
identified for proper settlement.
reactivate dormant accounts.
Since many deposit accounts were opened at bank branches
It highlighted the importance of organising camps at the through collaboration with the lead bank, block development
gram panchayat level from July 1 to September 30 as part
offices, selfhelp groups, NGOs, and gram panchayat activists,
of a focused effort to reactivate dormant accounts, open
their services should be utilised to encourage accountholders
new bank accounts, address customer grievances, and
to return to banks and reactivate their accounts. Local
promote microinsurance and pension products to deepen
authorities can educate account holders in their native
financial inclusion.
dialect, explaining how to restore their bank accounts.
No debits allowed This exercise can be seen as an opportunity for banks to
Dormant accounts in the PMJDY scheme account for 23 per rebuild relationships with a large number of depositors and
cent, while the World Bank's Findex Report 2025 states that boost savings deposits, especially at a time when the CASA
25 per cent of financial accounts in India are dormant across component is slowing down. (Source: BusinessLine)

52 | 2025 | OCTOBER | BANKING FINANCE