Rising dormant accounts pose a concern. If customer-initiated transactions haven’t occurred in the past two years in a deposit account, it is classified as inoperative or dormant. No customer-initiated debits are permitted in such accounts unless re-KYC is completed and the account is revived.
These dormant accounts are more vulnerable to fraud and misuse because their activity often goes unnoticed by the account-holder. They can also be misused as mule accounts to veil money laundering activities. Additionally, the bank misses potential opportunities for new deposit inflows. Therefore, an increase in the number of inoperative accounts could heighten the bank’s operational risks.
After 10 years of the Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme, many accounts now need re-KYC. As of July 30, 2025, the banking system has 56.04 crore accounts under the PMJDY scheme, holding a total of ₹2.62 trillion in deposits. Of these, nearly 13 crore accounts, which account for 23 per cent, have become dormant, raising concerns. Recently, in its monetary policy, the RBI emphasised the need for banks to take specific steps to reactivate dormant accounts. It highlighted the importance of organising camps at the gram panchayat level from July 1 to September 30 as part of a focused effort to reactivate dormant accounts, open new bank accounts, address customer grievances, and promote micro-insurance and pension products to deepen financial inclusion.
No debits allowed
Dormant accounts in the PMJDY scheme account for 23 per cent, while the World Bank’s Findex Report 2025 states that 25 per cent of financial accounts in India are dormant across the industry. Funds in these dormant accounts are safe, as no debit is allowed until the re-KYC process is completed and the accounts are properly activated. Thus, increasing dormant accounts in banks is of concern but not alarming. Similar trends are observed in debit card usage. Out of 990 million debit cards, approximately 200-250 million remain unused.
Among the many reasons for the increase in dormant accounts, the most significant is the lack of financial and digital literacy among account-holders who were mobilised during PMJDY account opening camps drawn from the hinterland. Of the 56 crore PMJDY accounts, 67 per cent are from rural/semi-urban areas. Similarly, out of the total 265.24 crore deposit accounts in the banking industry, 59 per cent come from rural/ semi-urban regions.
Banks can adopt the hub-and-spoke model to accelerate revival of dormant accounts. Branches and back offices should act as hubs, with business correspondents, financial literacy, and credit counselling (FLCCs) centres functioning as spokes to motivate target deposit account-holders to reactivate their accounts. Deceased accounts should be identified for proper settlement.
Since many deposit accounts were opened at bank branches through collaboration with the lead bank, block development offices, self-help groups, NGOs, and gram panchayat activists, their services should be utilised to encourage account-holders to return to banks and reactivate their accounts. Local authorities can educate account holders in their native dialect, explaining how to restore their bank accounts.
This exercise can be seen as an opportunity for banks to rebuild relationships with a large number of depositors and boost savings deposits, especially at a time when the CASA component is slowing down.
The writer is an Adjunct Professor at the Institute of Insurance and Risk Management, Hyderabad. Views are personal
Published on September 5, 2025
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