Friday, August 10, 2012

RBI Replaces "No-frills" Account with Basic Savings Account

On Friday, the 10th of August 2012, the Reserve Bank of India asked banks to drop the 'no-frills' tag from the basic saving accounts and convert all existing “no-frills” accounts into basic savings accounts.

What is a “no-frills” account?

The RBI had introduced “no-frills” accounts in 2005 to provide basic banking facilities to the poor and promote financial inclusion. These accounts could be maintained with very low minimum balance or zero balance.

Why has this step been taken?

This step has been taken to do away with the stigma associated with the nomenclature “no-frills” account and to make basic banking facilities available in a more uniform manner across the banking system. A circular has been issued to commercial banks in this regard.

Further directions given by the RBI:

The RBI has also asked the banks to provide the following facilities in the basic banking accounts:
  • Zero balance facility
  • ATM-cum-debit cards without any extra charge
  • No limit on the number of deposits that can be made in a month. However, Basic Savings Bank Deposit Account holders will be allowed a maximum of four withdrawals in a month, including through ATMs.
  • No charge will be levied for non-operation/activation of in-operative “Basic Savings Bank Deposit Account”