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Banks and regulators around the world periodically update rules to strengthen financial systems, protect customer assets, reduce fraud, and make banking more efficient. As of early 2026, new rules are being implemented that will result in the closure of certain types of bank accounts — starting January 20, 2026. These rule changes are part of a broader effort by authorities to ensure that bank accounts remain active, compliant, and secure, and to eliminate unused accounts that present risk and inefficiency.
Understanding which accounts are affected, why they are being closed, and how you can act to protect your funds is essential. This article breaks down the three types of bank accounts targeted for closure, what that means, and how account holders can respond.
1. Dormant Bank Accounts – High Risk, High Priority for Closure
What Is a Dormant Account?
A dormant account is a bank account that has seen no customer-initiated activity for an extended period — typically two years or more. “Activity” for regulatory purposes generally means things like deposits, withdrawals, transfers, bill payments, or any action initiated by the account holder.
Importantly, automatic credits such as interest payments or bank charges do not count as activity for keeping an account active. Only actions initiated by the customer count. (dcwbsunjnmsm.in)
Why Are Dormant Accounts Being Closed?
Dormant accounts are targeted because they:
Pose increased risk of fraud or misuse – accounts that are forgotten or rarely used are easier for criminals to take over without notice. (dcwbsunjnmsm.in)
Add inefficiency to the banking system, increasing costs for banks and regulators alike.
What Happens When a Dormant Account Is Closed?
Banks are expected to notify customers before any closure action.
Funds in closed dormant accounts are not lost — they are typically transferred to a secure government or regulator-managed fund (e.g., the Depositor Education and Awareness Fund in India). (dcwbsunjnmsm.in)
Customers or their heirs can claim the funds, though reclaim processes can be time-consuming.
Action to take: If you haven’t used an account in over a year, make at least one transaction and update your contact details and KYC to avoid dormancy.
2. Inactive Bank Accounts – Losing Status, Facing Closure
What Is an Inactive Account?
An inactive account is one with no customer-initiated activity for a specified period, commonly defined as 12 months or more. It’s a preliminary classification before an account becomes fully “dormant.” (dcwbsunjnmsm.in)
This includes basic checking and savings accounts where no withdrawals, deposits, transfers, or bill payments have occurred for a year or more.
Why Are Inactive Accounts a Problem?
Regulators view inactive accounts as:
Under-utilized and potentially forgotten by the owner, which makes them vulnerable to fraud.
Choking bank records and resources, as maintaining thousands of inactive accounts imposes unnecessary costs.
Regulatory Response
Under the new rules effective January 20, 2026:
Banks will flag accounts as inactive after the required period with warnings to customers. (LinkedIn)
If customers fail to act within a specified notification period, these accounts may be closed.
What You Should Do
Regularly monitor your accounts, even those you rarely use.
Make at least one legitimate transaction per year to keep them active.
Ensure your KYC (Know Your Customer) details such as address, phone number, and identity documents are up to date.
Failure to take these steps could result in unexpected closure.
3. Inactive Zero-Balance Accounts – Targeted for Elimination
What Are Zero-Balance Accounts?
Zero-balance accounts — particularly those opened for special purposes such as government benefit transfers or basic financial inclusion programs — have no minimum balance and often limited activity. A large number of such accounts can accumulate over time with zero transaction history and zero
balance.
Under the latest rules, accounts that remain zero balance with little or no transaction activity for extended periods are subject to closure. (dcwbsunjnmsm.in)
Policy Rationale
Regulators and banks have observed that:
Many zero-balance accounts remain inactive for years.
They provide little banking utility but still carry administrative cost and risk.
Some may be exploited for fraud, money laundering, or misuse if left open and unmonitored. (mdrb.in)
Who Is Affected?
Accounts with no activity and zero balance for a prolonged period.
These include accounts opened under special schemes whose owners have not used them in years.
Action Steps for Account Holders
If you have a zero-balance account with your bank, be sure to run a transaction occasionally to keep it active.
Link such accounts to useful services like utility payments or salary transfers to avoid classification as inactive.
Important Considerations: Funds Are Not Lost
If any of your accounts are closed due to these new rules:
✔ Your money is not lost – regulators require that funds be preserved in a protected fund or similar mechanism where they can be reclaimed. (dcwbsunjnmsm.in)
✔ You will be notified before closure — but you still must act quickly once notified.
✔ KYC matters — accounts with outdated or incomplete KYC details are particularly at risk of closure.
How You Can Protect Your Accounts
To avoid having your bank account closed under the new rules effective January 20, 2026, take these proactive steps:
1. Make Transactions Regularly
A single transaction every 6–12 months could be enough to prevent his account from being flagged as inactive or dormant.
2. Keep KYC Updated
Update identity verification, contact information, and address with your bank — banks and regulators both use this to classify activity status.
3. Monitor All Accounts
Even accounts you rarely use — such as old savings accounts opened long ago — should be reviewed.
4. Link to Services
Link your accounts to regular activities (e.g., payroll, mobile payments, standing instructions for bills) to ensure consistent activity.
5. Respond to Notifications
If your bank contacts you about account status, don’t ignore the alerts — banks typically send messages, emails, or letters well ahead of a potential closure.
Final Thoughts
The closure of dormant, inactive, and inactive zero-balance accounts starting January 20, 2026 represents a significant banking shift aimed at improving security, reducing fraud, and making the financial system more efficient. Account holders who stay informed and take proactive steps can protect their accounts and preserve access to their funds.
Stay alert, keep your banking activity regular, and ensure compliance with all KYC requirements — your financial stability depends on it.