In 2008, the Reserve Bank of India advised all banks to offer a no-frills account. The peculiar feature of these accounts was, they didn’t require the customer to maintain a minimum average balance (or very low MAB) and came with low charges, to make banking accessible to a vast majority of the people.
Today, these accounts have become popular as Basic Savings Bank Deposit Accounts (BSBDA) or zero balance savings account.
No-frills accounts place emphasis on the smallest deposits
No-frills accounts or zero balance savings accounts help customers get banking facilities without requiring them to maintain a minimum average balance. So the average sum balance needs to maintain the account is nil or zero. The other charges are also nil or minimal and no unnecessary services are attached to this type of account.
The downside of operating a no-frills account is, the bank doesn’t service these accounts like its other accounts. Once the limited services are used up, you’ll have to pay for the extra services.
Zero balance accounts are targeted at low-income group workers
The zero balance savings account product is targeted at the low-income populace, most of whom work in the unorganized sector. These people are either daily wagers or earn very less and they can’t lock up an amount in their savings deposit account every month. Until now, these people didn’t have a bank account and they used to keep their money at home. But not anymore.
No-frills accounts share several features with zero balance savings account. Here are some of them.
Deposit and withdrawal facilities
No-frills account holders can deposit and withdraw money at bank branches, ATMs, by cheque or through electronic means. There is also no difference in the interest component i.e. zero balance savings accounts are eligible to earn the same interest as the other accounts.
No limit on number of deposits each month
There is no limit on how many times the account holder or anyone else can deposit money into the account each month. But money can be withdrawn only four times in a month, which includes ATM withdrawals.
ATM card or ATM-Debit card facility is available
The zero balance savings account holder is eligible to receive an ATM card or ATM-Debit card at the bank’s expense. Please note, private banks may not offer a free ATM card or ATM-Debit card. Instead, they might offer a free ‘virtual’ debit card.
These facilities are provided free of charge
The bank can’t charge any money for the above services. In some banks, the no-frills account holder also receives a free passbook, a free cheque book with a fixed number of pages (one each year). In case, the customer wants any more services, he or she has to pay for it.
Please note, most banks no longer offer no-frill accounts. Instead, they’ve moved to zero balance savings accounts or BSBD accounts. You can only open a zero balance savings account after you’ve closed all your other savings accounts in the bank. You have to do this within 30 days of opening a BSBD account. Don’t forget, a zero balance savings account is subject to the same Know Your Customer or KYC requirement as other accounts.