In the modern banking practices, maintaining average monthlyor quarterly balance (AMB/AQB) in saving deposit accounts is one of the mostwidely applied norm to generate revenue by banks. As I have been consistentlywriting in this column, this minimum balance criterion is an amount which anaccount holder is supposed to keep in the account on a regular basis. Once theminimum average balance in the account falls below the stipulated amount, thebanks levy penalty.
But the norm has become ‘controversial’. The banks are quickenough to deduct charges in such accounts where average minimum balance norm isbreached. This is what has been anirritant to the account holders as they call it ‘breach of trust’ displayed bybanks.
Actually banks have tailored a series of savings bankaccount schemes for different segments of customers depending upon theireconomic status. It’s here the problem surfaces. One such type of Savings Bankaccount is basic savings bank deposit (BSBD) account, which was earlier calledas no-frill account. This account has been tailored especially for low incomegroups and for those who don’t want to come under the ambit of minimum averagebalance. But banks have been applying the minimum average balance norm in theseaccounts also, which is in violation of the Reserve Bank of India’s (RBI’s)direction that such accounts don’t fall under the said norm. May be banks mostof the times do it erroneously. But the fact is that such account holders arepenalized and they lose their money for none of their fault.
The BSBD account is the basic savings account that offerscertain minimum facilities, free of charge, to the account holders. Suchaccounts are primarily aimed at enhancing financial inclusion among theeconomically weaker sections.
Besides, there is no need for a minimum balance even at thetime of opening the account and a customer is provided with an ATM-cum-debitcard without any fees. Deposit and withdrawal services are free of cost. Also,the bank cannot levy charges for non-operation or activation of an inoperativeaccount.
The Reserve Bank of India has now asked the banks to offerminimum of four withdrawals in a month, including automatic teller machine(ATM) withdrawals, to the basic savings bank deposit (BSBD) account holders.This directions is coming into force from 1st July, this year. In its earlierdirection BSBD account holders were allowed up to four withdrawals in a month,including ATM withdrawals.
While making amendments in the features of the scheme, theregulator has said that banks are free to provide additional value-addedservices such as issuing cheque books beyond the above minimum facilities,which may or may not be priced (in a non-discriminatory manner) subject todisclosure.
However, availing of such value-added services shall be anoption for the customers and banks shall not require the customer to maintain aminimum balance. In other words, offering such additional services is not goingto make it a non-BSBD account.
There are certain responsibilities which the customers haveto observe while opening BSBD account. They will not be eligible for openingany other savings bank deposit accounts. Even they have submit a declaration tothe bank that they are not having a BSBD account in any other bank.
Precisely, those who are finding it difficult to maintainthe minimum average balance in their bank’s regular savings account, theyshould consider opening a basic savings bank deposit account. The interest ratewill be the same as that on the regular savings account. All regular featuresincluding deposit and withdrawal of cash at bank branches as well as ATMs,cheque book facility (payable at par or multi-city) and online funds transferare available in the account. These facilitieswill be provided without any charges. Even debit card facility would beprovided to the account holder.
Anyone can open BSBD account by submitting regular KYC(know-your-customer) documents. Even a customer can request his bank to converthis existing savings account into a BSBD. Rules envisage that the regularsavings account is to be closed within a month’s period from the date ofopening a BSBD account.
Lastly, the banks too have a responsibility to guide theircustomers with respect to variety of savings bank accounts. A well informedcustomer will go a long way to enhance brand image of banks through bettercustomer service. At least, they should ensure that minimum average balancecharges are not deducted from the basic savings bank deposit accounts.
(The views are of the author and not that of the institutionhe works for)