Reviving Inactive Bank Accounts Necessary

In a bid to reactivate dormant bank accounts and strengthen bank-customer relationships, the Reserve Bank of India (RBI) has emphasised the need for banks to take specific steps. This initiative comes at a time when the PMJDY scheme, launched by the government to financially include the unbanked population, has 56.04 crore accounts as of July 30, 2025, holding a total of ₹2.62 trillion in deposits.

However, nearly 13 crore accounts under the PMJDY scheme, or 23%, have become dormant. These dormant accounts pose a risk, as they can be vulnerable to fraud and misuse, including being used as mule accounts for money laundering activities.

To address this issue, banks can adopt the hub-and-spoke model. Branches and back offices will 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.

The services of those who assisted in the opening of these accounts, such as lead bank officials, block development offices, self-help groups, NGOs, and gram panchayat activists, should be utilised to encourage account-holders to return to banks and reactivate their accounts.

Local authorities can play a crucial role in this process, educating account holders in their native dialect, explaining how to restore their bank accounts. Camps at the gram panchayat level from July 1 to September 30 have been suggested by the RBI to reactivate dormant accounts and deepen financial inclusion.

It's important to note that funds in dormant accounts are safe, as no debit is allowed until the re-KYC process is completed and the accounts are properly activated. No customer-initiated debits are permitted in dormant accounts until re-KYC is completed and the accounts are revived.

This exercise can be seen as an opportunity for banks to rebuild relationships with a large number of depositors and boost savings deposits. Out of 990 million debit cards, approximately 200-250 million remain unused, and among the 265.24 crore deposit accounts in the banking industry, 59% come from rural/semi-urban regions.

The slowing down of the CASA (Current Account Savings Account) component is a current issue. Among the 56 crore PMJDY accounts, 67% are from rural/semi-urban areas. Banks, government agencies, and financial institutions that collaborated during the PMJDY account opening, such as the Ministry of Finance, banking correspondents, and local authorities, could now be engaged to renew accounts and strengthen bank-customer relationships.

The World Bank's Findex Report 2025 states that 25% of financial accounts in India are dormant across the industry. This initiative, therefore, is a significant step towards addressing this issue and promoting financial inclusion.

The author is an Adjunct Professor at the Institute of Insurance and Risk Management, Hyderabad. (Views are personal, published on September 5, 2025)

This article aims to provide a clear and concise understanding of the RBI's efforts to reactivate dormant bank accounts and the role of the PMJDY scheme in this process.