To cater to the varying needs of customers, banks design their strategy and introduce different schemes from time to time. Whether it’s a deposit scheme, investment product or credit card- banks have a wide range of options to offer to customers.

The same holds true for savings account schemes. Bank administer several types of savings accounts to your financial needs, gender, income level and occupation and so on.

The “Zero balance savings account” is one of these savings acount schemes which are tailored for a convenient banking solution to a specific segment of population. In this article, we will be discussing more about the scheme and talk about its features and benefits as well.

What is Zero Balance Savings Account?

Conventionally, a savings bank account requires you to maintain a certain amount of balance over a specific period of time, failing which you are liable to pay the penalty for non-maintenance of minimum balance.

With Zero Balance Savings Account, you don’t have to worry about all this. You are free to operate the account without maintaining a minimum balance.

As the name suggests, a Zero Balance Savings Account is where no minimum balance amount is set. You can keep zero balance in it without getting penalized by the bank.

The Purpose of Zero Balance Savings Accounts

Zero Balance Savings Accounts were introduced as “No-Frill” basic accounts by the Reserve Bank of India in 2005.

The main objective of the scheme was to achieve a greater financial inclusion by offering a special savings account scheme with zero or low minimum balance as well as charges. So that, a vast section of population can accesses the basic banking facilities.

The nature and number of transaction were restricted, but the scheme quite successful in providing banking services especially to the low-income group including students and nominal wage earners.

Basic Savings Bank Deposit Account (BSBDA) Replaces No-Frill Account

In 2012, RBI instructed all banks to remove the “No-Frill” tag in order to do away with the stigma associated with the nomenclature.

The “No-Frill” accounts were replaced by Basic Savings Bank Deposit Accounts and the existing ones were immediately converted.

The guidelines designed for No-Frill accounts were slightly modified to provide banking facilities to customers in a more uniform manner across the banking sector.

As per the RBI guidelines, the Basic Savings Bank Deposit Accounts are to be considered a normal banking service available to all. Even though the restrictions of “No-Frills” remained, customers were provided with a number of facilities for a better banking experience.

Following are the salient features of Zero Balance or Basic Savings Bank Deposit Accounts in India.

No Minimum Balance Required: Zero Balance accounts do not require a minimum balance. You can keep zero balance in it without worrying about the penalty for non-maintenance of minimum balance.

No Limit on the Number of Deposits: Although, you are free to make any number of deposits to the account in a month, you are only allowed a maximum of 4 withdrawals including ATM withdrawals. However, you need to confirm the feature from the bank itself .

For example, if you want to open a No-Frill Account is Axis Bank you have to ensure that the total amount of credit in the account doesn’t exceed Rs.1 lac in a given financial year. In addition, you are not supposed to maintain an account balance higher than Rs.50000 at any point of time.

Free ATM/ATM-cum-Debit Card: The Basic Savings Bank Deposit Account offers ATM or ATM-cum-Debit card to customer. Certain banks also offer international debit cards on request. However, the charges of issuance, replacement, annual usage, and transactions beyond free limits depend on individual bank’s discretion.

Common Banking Facilities: the services included in the zero balance account includes

  • Deposit and withdrawal of cash at bank branch as well as ATMs
  • Receipt or credit of money through electronic payment channels
  • Credit of money through deposit/collection of cheques drawn by Central/State Government agencies and departments

One Savings Account in One Bank: the zero balance account holders are not allowed to open any other savings account in the same bank. If they already have one, they have to close it within 30 days from the date of opening a Basic Savings Bank Deposit Account.

Conversion of No-Frills into BSBDA: As per the RBI instruction, the existing No-Frill basic accounts should be converted in to Basic Savings Bank Deposit Account.

KYC Compliance: The Zero Balance accounts must comply with the KYC/AML norms for opening of bank account. You have to submit the basic KYC documents. If the accounts are opened on the basis of simplified KYC norms, the account would additionally be treated as a ‘Small Account’.

No Activation Charges: If a zero balance account becomes inoperative, there will not be any charges for non-operation or activation of the account.

Interest on Deposits: You can earn interest on the deposits in your zero balance accounts. The interest rate will be same as the rate applicable to savings account in the bank.

Eligibility: the eligibility criteria for opening a zero balance account may vary from bank to bank. So you must visit your nearest branch to ascertain your qualification in this regard.

Other Benefits Offered by Banks

  • Free cheque book with limited number of leaves is available on request with certain banks. Subsequent cheque books are offered at specific charges.
  • Zero balance account holders are provided with complimentary passbooks. Certain banks offer free e-statement as well. In case you misplace or lost the passbook, the bank may apply charges while issuing the duplicate passbook.
  • Certain banks offer overdraft facility to zero balance account holders. However, this is subject to bank’s policy and credit history of the account holder.
  • Free Internet Banking and Mobile Banking facility to conveniently access the account are available for the zero balance savings accounts. So you can carry out certain financial transactions without visiting a branch.

Zero Balance Savings Account Through Pradhan Mantri Jan Dhan Yojana (PMJDY)

The Pradhan Mantri Jan Dhan Yojana was a revolutionary mission undertaken by the govt. to promote financial inclusion and offer an easy access to banking services to all citizens.

The scheme was kicked off in August 2014 which resulted in a massive increase in the total number of bank accounts in the country.

According to the report released by Ministry of Finance, Govt. of India, there are 21.81 crore PMJDY accounts opened as on 11.05.2016. Of the total, 17.97 crores have been issued a RuPay card.

The PMJDY Zero Balance account has certain restrictions in terms of eligibility, and deposit and withdrawal. But overall, the benefits are overwhelming. The account can be opened by any resident Indian aged 10 and above by providing basic KYC documents.

Here are a few benefits you get with PMJDY Zero Balance Account.

  • You don’t have to maintain a minimum balance
  • You earn interest on the deposit as per the rate applicable to savings accounts
  • A RuPay debit card is available for all account holders( aged 18 and above) which offers free Accidental Insurance Cover.
  • After satisfactory operation of account over the period you are become eligible for an Overfdraft facility upto Rs.5000.
  • The Direct Benefit Transfer from Govt schemes such as PAHAL are credit to this account
  • You can avail Accidental Insurance coverage of Rs.1 lac. And Life Insurance Cover of Rs.30000.

The terms and conditions for PMJDY may vary from bank to bank. So you should visit the bank to ascertain your eligibility and account opening procedure.

So, this is all about zero balance accounts in India. However, whether it is Basic Savings Bank Deposit Account or PMJDY Zero Balance account, the primary objective of each of the schemes is to promote financial inclusion and create a broader banking mechanism where every single person irrespective of his income level and occupation can access the banking facilities easily and explore the opportunities in life.

I hope the article was worth the read. If you have something to add, please write to me or drop a comment in the box given below.

Image Courtesy: compassion.com