RBI prefers zero-balance accounts

Public, private sector banks advised to allow no-frills accounts

You can open a zero-balance savings bank account anywhere in the country now, as the Reserve Bank of India (RBI) has mandated banks to offer a ‘basic savings bank deposit account’ with some minimum common facilities and not prescribe a minimum balance.

Simply put, the basic banking currently linked only to no-frills accounts – which earlier covered rural and underbanked customers – will now be made available to all customers irrespective of their economic status. Such accounts may have certain common facilities, but customers are not entitled to services such as a chequebook facility and unlimited ATM transactions.

If you insist on those, for instance a chequebook, be prepared to fork out an extra fee which envisages that the first cheque book will be given free but thereafter, Rs five will be charged for every cheque leaf.

The Reserve Bank will soon issue separate detailed guidelines for banks on the basic savings account.

In the case of a regular savings account, if the account holder’s monthly balance goes below the minimum required balance, a fine is levied on the customer. Even a PSU lender levies a fine of Rs 30 plus service tax if the account holder's monthly balance goes below the stipulated limit for just a day in the month. Private banks like ICICI Bank charges ‘Nil for the first two transactions of a month; thereafter in the month, Rs 90 per transaction” in the event of not maintaining the minimum average balance.

Earlier, such basic accounts were available only to rural and underbanked customers. The accounts are different from corporate / salaried accounts. Corporate accounts are also zero-balance accounts, but they offer the full range of banking services for its customers such as chequebook facility and limitless transactions on an ATM card. Corporate accounts also offer additional facilities like privilege banking and free monthly statement facilities.

“There is nothing new about the idea of a basic or no-frills account. RBI is basically trying to bring more and more people under the banking umbrella,” said Shyam Srinivasan, MD and CEO, Federal Bank.

Current accounts and savings accounts constitute about 30 per cent of total bank deposits and their growth is an important driver for a bank’s growth and profitability. Extending no-frills accounts to all customers might make some impact on banks as interest will be earned on the savings account balance, said an official of Punjab National Bank here.

In the annual monetary policy announcement on Tuesday, the RBI stated that “Financial inclusion has been high on the agenda of RBI… On a review, it has decided to modify the guidelines on opening of basic banking no-frills accounts with a view to doing away with the stigma associated with the nomenclature and making basic banking facilities available in a more uniform manner across the banking system.”