Your account is considered de-activated. In order to reactivate your account, you need to pay a fine of Rs.50 for each year that you have not made any subscription, and also make a minimum subscription of Rs. 500 for each year you have missed. Then your account will be reactivated and you will re-start earning interest.
The account will only be closed after maturity and will continue to earn interest till it is closed. The facility of loan or withdrawal will not be allowed from such account.
However, the account can be regularized by remitting a penalty of Rs. 50 per financial year and this should be credited to Government of India /Reserve Bank of India.
That is the best part. Sometimes there is shortage of money and then a year when you just forget to put some money in your ppf account. On such years a nominal fee is charged as penalty by the government. Read full details on http://www.financesguru.com/the-best-tax-saving-instrument-in-india-public-provident-fund/