New Rules Issued by RBI: From February 1, 2026, India’s banking system will quietly enter a phase that could reshape how millions of accounts are maintained. Acting on fresh directions from the Reserve Bank of India (RBI), banks across the country will begin identifying and closing certain long-unused accounts, especially those that have remained inactive or dormant for years. While the move has not grabbed flashy headlines like interest rate changes or loan waivers, its impact could be far more widespread.
Over the last decade, India witnessed an unprecedented push toward financial inclusion. Jan Dhan accounts, simplified KYC norms, digital wallets, and UPI ensured that nearly every adult had at least one bank account. But quantity came at a cost. A significant number of these accounts were opened and then forgotten. The RBI’s latest directive reflects a shift in focus from opening accounts at scale to ensuring they remain active, secure, and genuinely useful to customers.
Why RBI Is Turning Its Attention to Dormant Bank Accounts
At first glance, an unused savings account may seem harmless. There is no borrowing risk and often no minimum balance requirement. However, from a regulatory perspective, every account—active or not—demands monitoring. Banks must still comply with anti-money laundering norms, fraud detection systems, and periodic audits. When multiplied by crores of idle accounts, this becomes a costly and complex burden.
More importantly, dormant accounts have increasingly featured in fraud investigations. Cybercriminals prefer accounts that are not regularly checked by customers. Such accounts are easier to misuse for layering transactions or acting as mule accounts. According to a senior banker based in Mumbai, “Most large-scale digital frauds today involve accounts that were inactive for years. Customers don’t even realize misuse until much later.” The RBI’s concern is rooted as much in security as in efficiency.
How Inactive and Dormant Accounts Are Defined Under RBI Rules
The RBI has long maintained a distinction between inactive and dormant accounts, but the 2026 clarification removes lingering confusion. If an account sees no customer-initiated transaction for 12 consecutive months, it is classified as inactive. This includes the absence of cash deposits, withdrawals, transfers, card usage, or UPI payments. Simply logging into a banking app does not qualify as activity.
If inactivity continues for another 12 months, the account becomes dormant. Crucially, automatic entries—such as interest credits, subsidy reversals, or bank charges—do not reset the clock. Many customers assumed that interest posting kept accounts alive. The RBI has now stated otherwise. This clarification alone could surprise account holders who believed their old savings accounts were still technically “active.”
Three Categories of Accounts Facing Closure from February 2026
Under the clean-up exercise, banks will focus on three broad categories. The first includes accounts that crossed the inactive threshold and show no signs of customer engagement. The second category covers fully dormant accounts—those untouched for more than two years despite reminders from the bank. These are often legacy accounts opened during earlier employment or education phases.
The third category is zero-balance accounts that were opened but never used. During mass drives under government schemes, many such accounts were created but remained transaction-less. However, the RBI has drawn a clear line: zero-balance accounts that continue to receive pensions, scholarships, DBT subsidies, or welfare payments will not be closed as long as transactions continue. Activity, not balance, is the deciding factor.
What Happens to the Money in a Closed Bank Account
One of the biggest anxieties among customers is the fear of losing their savings. RBI regulations explicitly prevent this. Any remaining balance in a closed account is transferred to the Depositor Education and Awareness (DEA) Fund, which is managed by the central bank. The money does not vanish, nor does it become bank profit.
That said, reclaiming funds from the DEA Fund is not instant. Claimants must complete identity verification and KYC formalities, either directly or through the original bank. Another drawback is that once the money moves to the fund, it stops earning interest. Financial planners warn that delayed claims could mean losing out on years of potential earnings, especially for small but long-held balances.
Who Is Likely to Feel the Impact Most
Urban professionals with multiple salary accounts may barely notice the change. For them, this exercise could even be beneficial, nudging them to consolidate finances. The real concern lies elsewhere. Elderly individuals, migrant workers, and rural account holders often conduct infrequent transactions and may not regularly check SMS alerts or emails.
Recognizing this, the RBI has asked banks to go beyond routine notifications. Phone calls, written notices, and communication in regional languages are now mandatory before closure. A Delhi-based financial inclusion researcher notes, “Account inactivity is often not neglect but circumstance. Banks need empathy as much as enforcement.” How banks handle this outreach will determine public trust in the process.
Lessons from Other Countries and What Comes Next
India is not alone in addressing dormant accounts. The UK and Australia have long-standing frameworks to identify and manage inactive deposits. In some cases, funds are pooled for public use until claimed. The RBI studied these models but tailored its approach to India’s scale and diversity, where digital literacy and access vary widely.
Looking ahead, experts expect stricter periodic account reviews, stronger nominee enforcement, and deeper integration of digital identity tools. Banks may also incentivize minimal activity rather than wait for dormancy. While the February 2026 deadline may cause temporary inconvenience, policymakers believe it will ultimately lead to a safer, cleaner, and more transparent banking ecosystem.
Public Sentiment and the Broader Policy Signal
Public reaction to the RBI’s move has been mixed. Some see it as overdue housekeeping, while others worry about overreach. On social media, concerns range from forgotten childhood accounts to fears of bureaucratic hurdles. Yet, economists argue that financial inclusion is meaningful only when accounts are actively used and monitored.
The policy signal is clear. India’s banking journey is entering a mature phase, where quality matters as much as quantity. The emphasis is shifting from opening accounts to ensuring engagement, security, and accountability. For customers, the message is simple: even a small transaction once in a while can keep an account alive and avoid unnecessary complications.
Disclaimer: This article is intended for general informational purposes and reflects publicly available RBI guidelines and expert commentary. Banking rules, timelines, and implementation practices may vary across institutions. Readers are advised to check directly with their bank or consult a qualified financial professional before taking any action related to account status or closure.