Recent data from 2025 marks a growing concern in India’s banking sector. Nearly 23% of accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme have become dormant. These accounts have had no customer-initiated transactions for over two years. The Reserve Bank of India (RBI) has urged banks to take active measures to revive these accounts. This situation presents risks and opportunities for the banking system and financial inclusion efforts.
Definition and Risks of Dormant Accounts
Dormant accounts are deposit accounts with no customer-initiated debit transactions for two years. Such accounts cannot be debited unless re-KYC (Know Your Customer) is completed and the account is reactivated. Dormant accounts are vulnerable to fraud and misuse, including money laundering through mule accounts. They also represent missed opportunities for banks to mobilise deposits and engage customers.
Scale of Dormancy in India’s Banking Sector
As of mid-2025, India’s banking system holds 56.04 crore PMJDY accounts with ₹2.62 trillion in deposits. About 13 crore (23%) of these accounts are dormant. The World Bank’s Findex Report 2025 shows 25% of all financial accounts in India remain inactive. Debit card usage reflects a similar pattern, with nearly 200-250 million cards unused out of 990 million issued.
Causes Behind Dormancy
A major cause is low financial and digital literacy, especially among rural and semi-urban populations. PMJDY accounts were largely opened through camps in remote areas. Around 67% of these accounts belong to rural or semi-urban customers. Lack of awareness on account usage and benefits contributes to inactivity.
Regulatory and Bank Responses
RBI’s 2025 monetary policy stresses reactivating dormant accounts. It recommends gram panchayat-level camps from July to September to revive accounts, open new ones, and promote micro-insurance and pension schemes. Banks are encouraged to use a hub-and-spoke model where branches act as hubs and business correspondents or financial literacy centres as spokes to reach account holders.
Strategies for Reviving Dormant Accounts
Banks should identify deceased account holders to settle accounts properly. Collaboration with local bodies like NGOs, self-help groups, and gram panchayat activists is vital. These groups can educate customers in local languages about re-KYC and account activation. This revival effort can strengthen customer-bank relationships and boost low-cost low-interest deposits, especially when CASA (Current Account Savings Account) growth is slowing.
Impact on Financial Inclusion and Banking
Reactivating dormant accounts supports financial inclusion by reconnecting millions to formal banking. It helps banks increase deposit bases and expand outreach. Addressing dormancy also reduces fraud risks and enhances trust in the financial system. The drive aligns with India’s broader goals of deepening access to banking services across all regions.
Future Outlook
Continued efforts in financial literacy and digital empowerment are key. Banks and regulators must sustain engagement with rural customers. Technology-enabled solutions and community participation will remain crucial to reduce dormancy and strengthen India’s inclusive banking ecosystem.
Questions for UPSC:
- Point out the challenges and opportunities posed by dormant bank accounts in India’s financial inclusion drive.
- Critically analyse the role of financial literacy and digital inclusion in reducing dormant accounts with suitable examples.
- Estimate the impact of the Pradhan Mantri Jan Dhan Yojana on rural banking and discuss the reasons for account dormancy.
- Underline the significance of the hub-and-spoke model in banking outreach and how it can be leveraged for reviving inactive accounts.
