Client Alert: Biannual Freezing of Dormant Small Savings Accounts by India Post Legal and Regulatory Implications

Effective July 15, 2025, the Department of Posts, Government of India, pursuant to SB Order No. 10/2025, has institutionalised a biannual account freezing protocol for matured but unclaimed accounts under various Post Office Small Savings Schemes.

This regulatory change imposes a formal obligation on all India Post branches to freeze inoperative accounts that have remained unsettled for over three (3) years post maturity, during two fixed annual windows. The said directive has considerable implications for individuals, financial institutions, corporate trustees, and estate administrators dealing with such instruments.

This alert sets out the underlying legal framework, enforceability, and compliance obligations, and provides actionable insights for corporate entities and regulated financial participants.

A. Governing Legislation

The freezing of matured accounts finds its legal origin in the following statutory instruments:

1. The Government Savings Promotion Act, 1873 (as amended);

2. The Government Savings Promotion General Rules, 2018 (hereinafter “GSPR 2018”);

3. The respective scheme-specific rules governing instruments such as:

   • National Savings Certificate (NSC),

   • Public Provident Fund (PPF),

   • Kisan Vikas Patra (KVP),

   • Senior Citizens Savings Scheme (SCSS), inter alia.

The aforementioned rules have been notified under Section 15 of the 1873 Act, empowering the Central Government to prescribe rules for the management, operation, and closure of small savings schemes.

B. Administrative Orders

The recent policy shift is effectuated through:

• SB Order No. 25/2022 (dated 16 December 2022), which initiated the mandate to freeze matured and unclaimed accounts after three years; and

• SB Order No. 10/2025 (dated 15 July 2025), which introduces a fixed biannual freezing calendar for uniform nationwide execution.

Although administrative in form, these Orders are binding on all postal officials and depositor relationships, as they derive authority from delegated statutory rulemaking powers under the 1873 Act and Article 77(3) of the Constitution of India.

 Biannual Freezing -

A. Applicability

The following accounts are within the regulatory purview of the freeze protocol:

• Public Provident Fund (PPF)

• National Savings Certificate (NSC)

• Kisan Vikas Patra (KVP)

• Senior Citizens Savings Scheme (SCSS)

• Post Office Time Deposit (TD)

• Monthly Income Scheme (MIS)

• Recurring Deposit (RD)

B. Conditions for Freezing

The operative trigger for freezing is the lapse of three years from the maturity date of the account, without:

• Formal closure; or

• Extension of tenure under applicable scheme rules.

Such accounts are to be flagged as “INOP – Inoperative > 3 years” in the India Post Core Banking System.

C. Execution Window

Freezing shall occur during the following designated periods:Freeze Cycle & Date Window

Mid-Year 1 July – 15 July

Year-End 1 January – 15 January

During this 15-day window, Head Post Offices and Sub-Offices are statutorily mandated to implement the freezing of eligible accounts. This will be driven by a system-generated report, requiring no depositor notification prior to the freeze.

Legal Repercussions of Freezing

Once frozen:

• No transactions (credit or debit) are permissible;

• No interest shall accrue beyond the maturity date;

• Accounts are non-operational, and cannot be closed, transferred, or extended without formal reactivation;

• Online access and withdrawal rights are suspended;

• ECS transfers, auto-credits, and standing instructions are disallowed.

This is not a civil forfeiture of funds, but a procedural safeguard with custodial and anti-fraud intent, consistent with principles of fiduciary responsibility and KYC enforcement.

 Procedure for Reactivation / Unfreezing

To revive a frozen account, the depositor (or legally authorised representative) must:

1. Present themselves in person at the home branch of the Post Office;

2. Submit the following documentation:

   • Passbook / Certificate;

   • Valid KYC documents (PAN, Aadhaar, Address Proof – in compliance with Rule 6 of GSPR 2018);

   • Form SB-7A (for closure or withdrawal);

   • Cancelled cheque or bank passbook copy for ECS credit.

Post verification, the account may either be closed or extended, and proceeds credited to the depositor’s registered bank account.

Legal Risks and Advisory for Stakeholders

A. For Individual Depositors

Failure to act within three years of maturity will lead to account dormancy, suspension of interest, and the need for additional formalities for reactivation. In cases involving deceased depositors, succession and probate procedures may further delay access.

B. For Financial and Corporate Institutions

• Wealth Managers / Bankers: Track client scheme maturity timelines to mitigate dormant exposure;

• Corporate Trustees: Audit employee benefit trusts or gratuity funds held in post office instruments;

• Estate Planners and Executors: Ensure matured accounts are closed or assigned through probated wills or succession certificates;

• KMPs and CFOs: Flag such instruments in statutory audit disclosures under AS 29 / Ind AS 37 as contingent assets if recovery is delayed.

C. For Compliance and Risk Officers

• Add SB Order No. 10/2025 to the institution’s regulatory compliance repository;

• Integrate maturity tracking into automated compliance tools;

• Train relationship managers to educate clients on freeze consequences and extension formalities under scheme rules.

Conclusion and Action Points

The enforcement of SB Order No. 10/2025 marks a formalisation of the Indian government's intent to streamline the administration of public savings schemes, reduce dormant liabilities, and ensure KYC and beneficiary transparency.

With the next freeze cycle scheduled for January 2026, it is imperative that all stakeholders:

1. Conduct an immediate audit of all Post Office-based investments;

2. Take appropriate steps for closure, reactivation, or succession;

3. Implement internal SOPs and client advisories to prevent unintended freezes.