Replace 'no-frills' account with basic savings accounts, RBI tells banks

The Reserve Bank of India (RBI) today asked banks to extend basic savings account facilities to all account holders and drop the 'no-frills' tag from the basic saving accounts.

RBI has advised banks to provide zero balance facility in the basic banking accounts along with ATM-cum-debit cards without any extra charge.

"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," RBI said in a circular issued to scheduled commercial banks.

The 'no-frills' accounts were introduced 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.

RBI has asked the banks to convert the existing 'no-frills' accounts into 'Basic Savings Bank Deposit Accounts'.

While there will be no limit on the number of deposits that can be made in a month, Basic Savings Bank Deposit Account holders will be allowed a maximum of four withdrawals in a month, including through ATMs.

"This account shall not have the requirement of any minimum balance...Further, no charge will be levied for non-operation/activation of in-operative 'Basic Savings Bank Deposit Account'," the RBI said.

Accordingly, under the modified guidelines, basic savings bank deposit accounts will be provided with services like receipt of money through electronic payment channels or by cheques issued by government agencies.

This would also help those covered under the welfare schemes like MNREGA in receiving payments.

The new guidelines include:

  • Basic Savings Bank Deposit Account should be considered a normal banking service available to all.
  • This account should not have the requirement of any minimum balance.
  • 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;
  • 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 facility of ATM card or ATM-cum-Debit Card.
The above facilities will be provided without any charges. Further, no charge will be levied for non-operation/activation of in-operative 'Basic Savings Bank Deposit Account'.

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.

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.

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'.

The existing basic banking 'no-frills' accounts should be converted to 'Basic Savings Bank Deposit Account'.