Every institution has specific rule and regulation that guides its operation and the financial institution is not exempted from this. The central bank of Nigeria has given guidelines regarding banks, bank accounts and bank operations and one of the primary rules is that we must ensure that we initiate some financial transactions and activity on our accounts every few months.
The CBN has created a regulatory framework for the management of dormant accounts in Nigeria for the benefit of the banking system and according to data from the Nigeria inter-bank settlement system(NIBSS) there are about 44.5 million dormant bank accounts. People most times don’t know what it entails to keep an account active and running. Opening an account is one thing but ensuring that the account is active and still in use is another ball game.
What Is A Dormant Account?
A dormant account can be defined as a financial account that has been inactive for a long period of time usually between twenty-months(24)- three (3 )years depending on the bank or financial institution.
This simply means that financial activities that keep account activities such as making deposit, withdrawals, transfers or even logging into the account hasn’t been conducted within that period of time and the bank has the right to close such account either a savings account or a current account. It’s noteworthy to know that automatic posting of interest and dividends that occur in such an account is not to be considered an activity.
What Happens Before A Bank Account Becomes Dormant?
Before an account becomes dormant, the bank must have to try to contact the account holder over a specific period of time through the bank emails, calls and letters and a final warning is usually issued, if the customer fails to respond and the financial institution cannot establish a connection with the account holders, the bank is entitled to mark the account as inoperative and eventually inactive. Financial institutions determine whether an account is dormant, depending on their policies.
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Difference Between An Inactive Account And A Dormant Account
There is a clear difference between an inactive account and a dormant account.
An account is said to be inactive when it hasn’t conducted any financial activity for the period of six(6) to twelve(12) months while an account is considered dormant when financial activities haven’t been carried out for a period of twenty-four(24) months and above.
Causes Of Dormant Account
There are some likely factors that could contribute to an account becoming dormant and some of these factors include:
When An Account Has Been Inactive For A Long Period Of Time:
This simply means that if no financial transaction such as deposits, withdrawals or transfers hasn’t been conducted in that account for a duration of 12 months to 3 years, such account will be stamped dormant by the bank.
Customers Owing Multiple Bank Accounts With Different Banks:
This could be one reason customers’ bank account becomes dormant, thee are some people who have numerous bank accounts with different banks and it becomes difficult for them to keep tabs on each of the bank accounts and this has led to them ignoring certain account for a long period of time.
Poor Customer Service On Both The Side Of The Bank Management And Its Employees:
This is also a reason, sometimes when customers do not experience satisfactory services offered by the bank they tend to look for other options. People want to make use of banks that will meet their expectations in terms of financial activities they want to carry out and when this is not achieved, they tend not to make use of that account and when it remains not used for a long period of time, the bank is entitled to make it dormant.
Suspicious Activities Or Transactions:
When a bank becomes aware of any bank transactions that look or seem unusual or suspicious, such recipient’s account will be temporary stamped dormant and will be contacted by the bank to confirm the transfer validation This is done to avoid security purposes and to keep the customer’s money safe.
What Happens When An Account Becomes Dormant?
After the bank has marked the account as inactive, and it becomes dormant initially it automatically goes to a PND status which simply implies ‘Place no debit’ this simply means that a person is allowed to make payment into a dormant account but cannot make withdrawals with such accounts except such person goes to the bank to reactivate the account but if an account becomes dormant for a long period, the bank will delete and block such account.
There are strict policies the CBN bank has put in place regarding dormant accounts and all banks which all banks and financial institutions are mandated to abide by it.
Some requests cannot be made with a dormant account and some of these requests include:
- Renewing of ATM cards
- Signature modification
- No transaction is possible either through internet banking or a branch in the bank.
Some Of The Stipulated Guidelines The CBN Stated Out Regarding Dormant Account Includes;
- Interest bearing account shall retain their interest-earning status during the period of dormancy which simply means that if an account is entitled to interest per time such interest still accrue to the account regardless of if it’s dormant.
- The financial institution should continue to monitor accounts that shoes tendencies of inactivity and ensure they carry out actions for their reactivation or protection from wrong usage and some of these activities involve sending SMS, Emails, or phone calls.
- Dormant accounts shall be reported to banking supervision or other financial institution supervision department of CBN.
- The banks should ensure they notify the account holder three months to dormancy.
Documents Needed To Reactivate A Dormant Bank Account
Below are the documents needed to reactivate a dormant account for the following set of people.
- Individual account holders
- Sole Proprietorship
- Limited Liability company
- Non-resident Nigerians
Individual Account Holders
- A valid ID card such as a National identity card, international passport, or permanent voters cards.
- Bank verification number (BVN).
- Utility bill or Nepa bill as it is generally called.
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- A duly filled dormant corporate account reactivation form or Reactivation letter signed by the authorized account signatory.
- Valid regulatory ID card of the authorised signature.
Limited liability companies
- A duly filled dormant corporate account reactivation form or a board resolution signed by two directors or a director and the company secretary.
- Valid regulatory ID card of authorized signatories.
For non-resident Nigerians
- A duly completed and signed dormant account reactivation/.update form.
- Notarized Utility bill or stamped bank statement issued within the last three (30 months
- Valid Nigerian international passport, Driver’s license, Permanent voter’s card or National ID card.
How To Re-Activate A Dormant Bank Account.
A dormant account can only be re-activated at the bank branch as there hasn’t been a provision of an online facility created for this purpose. The reason why this is restricted to physical presence is to counter any fraudulent activities that may occur as a result of a third party having access to the account and it also helps banks diligently verify customer credentials before reactivating the accounts.
The Following Are The Actions One Need To Perform To Reactivate A Dormant Account:
- Pick your valid ID card( permanent voters card, international passport, national Id card), your BVN and your utility bill.
- Head to any of your bank branches
- Go to the customer care service and state your request.
- A dormant bank account reactivation form will be issued to you, fill in the details correctly and accurately and you could be required to fill out a customer information form (Premise verification report) for you to update your current place of residence.
- Submit the form once you are done.
- You would be required to pay a specific fee for reactivating a dormant account and prices vary in different banks.
- Your account will be activated within 24 hours and you can commence transactions with the account.
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How To Prevent Your Account From Becoming Dormant Or Inactive.
- Ensure you conduct transactions on your bank regularly such as cash deposit or withdrawal, cheque deposit or withdrawal at least once every six months.
- Funds transfer to and from the account this could be via mobile banking, internet banking or you could simply use bank codes.
- Ensure your address and contact information are updated regularly so that you don’t miss out on important information.
There has been a rise in the number of dormant bank accounts in Nigeria and this has made the need for reactivation essential. The segregation of inoperative accounts is to reduce the risks of fraud. The essence of creating awareness of what a dormant account is is for the bank users to take the necessary preventive measures to ensure that their account remains active and for it not to be labelled as dormant as the process of recovering or activating one’s account tends to be strenuous. So it’s advisable to always ensure we keep a tab of all our accounts to ensure it’s still operational and be diligent enough to open accounts for specific purposes.