The Reserve Bank of India (RBI) has taken several measures to ensure the most basic banking facilities are made available to the Indian population. Very often, individuals from low-income backgrounds rarely ever have bank accounts where their finances can be saved. This is mainly because opening a savings account in most banks includes having to maintain a minimum balance in your account at all times. If the balance of the savings account dips below the required minimum balance to be maintained, the bank usually levies a fine.
In an attempt at financial inclusion, the RBI launched the 'No Frills' account in 2005. The No Frills account aimed to offer the most basic banking service to those from the low-income backgrounds. The concept was formulated as means of providing individuals from low-income backgrounds the opportunity to benefit from the credit and savings programs offered by most financial institutions.
With all the above-mentioned factors considered, the No Frills account was launched and it allows its holders the ability to open and maintain a savings account with zero balance. Those who hold No Frills accounts are offered basic banking services such as mobile and internet banking, a free Debit Card and access to ATMs all over the country. In addition, No Frills account holders also have the option to receive free quarterly account statements to their registered email id. In addition, the service charges applicable to the No Frills account were substantially lower than those of the regular savings accounts. As a result of the zero balance requirement that most banks offered, the account became commonly known as a zero-balance account.
Since its launch in 2005, the No Frills accounts began to receive a large number of applicants. However, the title 'No Frills' seemed to stigmatise those who hold such accounts. In an attempt to undo the stigmatisation associated with the title, the RBI replaced the title of the account to Basic Savings Bank Deposit Account (BSBDA) in 2012. Therefore, the No Frills account and the Basic Savings Bank Deposit Account are essentially the same thing.
According to an official notification by the RBI, the services offered by BSDAs intends to bring uniformity across the banking system. Since its launch, the RBI has instructed all banks that offered the no-frills accounts to convert existing accounts into Basic Savings Deposit Accounts. This notification also included offering services such as unlimited deposits to the account, zero charges on ATM/debit cards, and no fines for accounts that are inactive. Moreover, the Basic Savings Deposit Accounts do not impose any restrictions on income or age and is available to all Indian residents.
Opening a Basic Savings Bank Deposit Account
- When it comes to Basic Savings Bank Deposit Accounts in the same bank, only one account per person is permitted. In cases where a person wishes to open another account with their bank, they must first close the existing BSBDA before opening a new one.
- In the same way, if a person holds a Basic Savings Bank Deposit Accounts in a particular bank, they are not permitted to hold another type of savings account in that same bank. If an existing savings account is held in the same bank, the customer will have to close the account within 30 days of opening a Basic Savings Bank Deposit Account.
- The bank would only require the most basic Know Your Customer (KYC) norms when opening an account. In these cases, the BSBDA would be treated as a 'small account' and all the restrictions that are applicable to small accounts would be applicable to the Basic Savings Bank Deposit Account.
- Banks do not levy any fees for the services offered to Basic Savings Bank Deposit Accounts.
Dos and Don’ts for a Basic Savings Bank Deposit Account
- A person holding a Basic Savings Bank Deposit Account cannot have the credits in their account to exceed Rs.1 lakh in a year.
- A maximum amount of Rs.50,000 can be deposited in the account at one time.
- Individuals opening a Basic Savings Bank Deposit Account need not deposit any amount at the time of opening.
- Banks that have core banking services are ideal branches for opening a Basic Savings Bank Deposit Account.
- Account holders are only permitted a maximum of four withdrawals a month. However, the withdrawals are free of charge.
- Foreign exchange can only be deposited into account if the regular KYC procedures are complete.
While there is no difference between the functions of a Basic Savings Bank Deposit Account and a regular savings account, the facilities offered differ from bank to bank. Basic Savings Bank Deposit Accounts are ideal for accounts that are not used regularly.
FAQs on Basic Savings Bank Deposit Account Vs. No-Frills Account
Can I have multiple Basic Savings Bank Deposit Accounts in a bank?
No, you can only have one Basic Savings Bank Deposit Account in a bank
Are there any age or income criteria to open a BSBDA in a bank?
No. Banks are advised not to impose any age or income criteria to open a BSBDA.
Can a BSBDA be opened by only economically weaker sections of society?
No. All individuals are eligible to open a BSBDA.
Can I open other deposit accounts in a bank where I hold a BSBDA?
Yes. You can open Recurring Deposits, Fixed Deposits, etc., in a bank where you hold a BSBDA.
What is the minimum deposit amount to open a BSBDA?
You can open a BSBDA without depositing any amount.
What is the maximum amount I can deposit in a BSBDA?
You can deposit a maximum amount of Rs.50,000 in a BSBDA.
Can I convert my normal savings account into a BSBDA?
Yes. You can convert your normal savings account into a BSBDA.
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