The central bank had introduced 'no-frills' accounts in 2005 to provide basic banking facilities to poor and promote financial inclusion**. The accounts could be maintained without or with very low minimum balance.
Reserve Bank of India as per Circular dated 10.8.2012 asked banks to drop the 'no-frills' tag from the basic saving accounts as the nomenclature has become a stigma.
It has asked the banks to provide zero balance facility in the basic banking accounts along with ATM-cum-debit cards without any extra charge.
The details of the circular are given below:
1.Banks were advised in November 2005 to make available a basic banking 'no-frills' account either with 'nil' or very low minimum balance as well as charges that would make such accounts accessible to vast sections of population.
With a view to doing away with the stigma associated with the nomenclature ‘no-frills’ account and making the basic banking facilities available in a more uniform manner across banking system, it has been decided to modify the guidelines on opening of basic banking ‘no-frills’ accounts.
Accordingly, in supersession of instructions contained in circular DBOD.No.Leg.BC. 44/09.07.005/2005-06 dated November 11, 2005 on Financial Inclusion, banks are advised to offer a ‘Basic Savings Bank Deposit Account’ which will offer following minimum common facilities to all their customers:
i. The ‘Basic Savings Bank Deposit Account’ should be considered a normal banking service available to all.
ii. This account shall not have the requirement of any minimum balance.
iii. The services available in the account will include deposit and withdrawal of cash at bank branch as well as ATMs; receipt/credit of money through electronic payment channels or by means of deposit/collection of cheques drawn by Central/State Government agencies and departments;
iv. While there will be no limit on the number of deposits that can be made in a month, account holders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals; and
v. Facility of ATM card or ATM-cum-Debit Card;
3. Banks would be free to evolve other requirements including pricing structure for additional value-added services beyond the stipulated basic minimum services on reasonable and transparent basis and applied in a non-discriminatory manner.
4. The ‘Basic Savings Bank Deposit Account’ would be subject to RBI instructions on Know Your Customer (KYC) / Anti-Money Laundering (AML) for opening of bank accounts issued from time to time. If such account is opened on the basis of simplified KYC norms, the account would additionally be treated as a ‘Small Account’ and would be subject to conditions stipulated for such accounts as indicated in paragraph 2.7 of Master Circular DBOD. AML. BC. No. 11/14.01.001/2012-13 dated July 02, 2012 on ‘KYC norms/AML standards/Combating of Financing of Terrorism (CFT) /Obligation of banks under PMLA, 2002’.
5. Holders of ‘Basic Savings Bank Deposit Account’ will not be eligible for opening any other savings bank deposit account in that bank.
If a customer has any other existing savings bank deposit account in that bank, he/she will be required to close it within 30 days from the date of opening a ‘Basic Savings Bank Deposit Account’.
6. The existing basic banking ‘no-frills’ accounts should be converted to ‘Basic Savings Bank Deposit Account’ as per the instructions contained in para 1 above.
** Financial inclusion is the process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low-income groups at an affordable cost in a fair and transparent manner by mainstream institutional players.
Financial inclusion has become one of the most critical aspects in the context of inclusive growth and development.