The Indian Post Office freezes savings accounts under specific regulatory conditions, primarily due to account inactivity, unclosed accounts after maturity, or non-compliance with identification rules. Recently, it has issued an order to make account freezing a regular exercise to be conducted twice a year to identify such accounts. These accounts include Time Deposits (TD), Monthly Income Scheme (MIS), National Savings Certificates (NSC), Senior Citizen Savings Scheme (SCSS), Kisan Vikas Patra (KVP), National Savings Certificate (NSC), Recurring Deposit (RD), and Public Provident Fund (PPF) accounts. Though this regulatory safeguard helps prevent fraudulent or unauthorised activities and ensures the hard-earned money of investors remains protected, it is better for account holders to keep their accounts active and close them upon maturity.
Let us understand the reasons for an account freeze, the transactions allowed in a frozen account, and the process to unfreeze it.
Common Reasons For Account Freezing:
• The account is matured, but the account holders have not closed it within three years after maturity.
• No transaction activity for three consecutive financial years becomes 'silent' or 'dormant', which stops all transactions.
• Missing PAN number or Form 60 in accounts that have been opened after December 2018
These accounts are now assigned the freeze reason code 'INOP: – Inoperative more than 3 years'.
Implications Of Frozen Accounts
When a post office small savings account becomes dormant or is frozen after maturity, all transactions, including withdrawals, deposits, standing instructions, and online services, are suspended. The account becomes non-operational and immediately stops earning interest. In this case, account holders must reactivate or unfreeze their accounts before any transactions can occur. Settling claims for deceased account holders can even create legal complexities; the nominees must submit extra documents and require court orders if the nomination is unregistered, delaying payouts for weeks or months.
How To Unfreeze Small Savings Account
To unfreeze and close such accounts, the account holders need to follow these steps:
• Visit the Post Office with original passbook or certificate along with updated Know Your Customer (KYC) documents: mobile number, PAN card, and Aadhaar, or other approved address proof as per Rule 6 of Government Savings Promotion General Rules-2018
• Provide details of a Post Office Savings Account or a bank account, including a cancelled cheque or a copy of the passbook, for the maturity value to be credited
• Fill the Account Closure Form (SB-7A) if the account is frozen after maturity
The concerned post office also obtains depositor's signatures on the acquittance portion of the form, so that account holders will not need to visit post office again just to get the amount credited.
Once this process is completed by the accountholder, the post office staff verifies credentials and signatures to confirm the authenticity of the account. For accounts held at a Branch Post Office or Sub Office, the Senior Postmaster (SPM) forwards all necessary documents to the Head Post Office to facilitate unfreezing and closure.
Two supervisors there verify the details before the unfreezing the account. Following that, the funds are credited to the accountholder’s savings or bank account via the electronic clearing system (ECS).
Note that account activation is not allowed online. Account holders must visit their respective post office branch.
