Straight Talk|Basic things accountholders should know

The most common type of bank account, and probably the first account you will ever have, is a Savings Bank Account. It’s the primary route through which you get linked to a bank. In fact, in today’s era, a common man cannot think without having a relationship with a bank and this Savings Bank Account is the foundation stone of such relationship. It’s this account which allows you to keep your money not only safe but also earn interest on the amount deposited in the account. In other words, a bank account has become mandatory to avail benefits of government services and schemes.

Banking operations have undergone a sea change. Integration of technology into the core banking operations has helped the banks to provide a series of services such as internet banking, mobile banking, swift transfer of funds anywhere in the world, credit cards, debit cards etc. However, there are certain issues confronting the accountholders, which have been harmful to the banker-customer relationship. On one side, bank customers have been vomiting anger against services charges/ transaction fees etc. On the other, banks have been very casual in guiding their customers with respect to services and charges to be applied.

Can banks stop applying interest to Savings Bank Account on the instructions of an accountholder?

No. Under the Reserve Bank of India guidelines “banks cannot accept interest free deposits other than in current account.” So in no case a bank can stop applying interest in savings bank accounts. For this purpose a depositor has to open a current account, in which interest is not paid on the deposited amount.

After opening fresh current account, the balance in the savings bank account shall be transferred to the current account. Notably, CurrentAccount is basically a business account.

Can Savings Bank Account be used for business purpose?

No. As per the RBI directives Savings Bank Account should only be used to route transactions of only non-business / non-commercial nature and cannot be used for business purposes. In the event of anybusiness transaction or any other such transactions that may be construed as dubious or undesirable, the bank reserves the right to unilaterally freeze operations in such accounts.

What is minimum balance criterion in Savings Bank Accounts?

RBI guidelines envisage that the balance in the Savings Bank Account must adhere to the minimum average balance stipulation laid down by the bank. Non-maintenance of such average balance will attract applicable penalty on a date determined by the bank.

Precisely, you are required to maintain average balance in your account. It is the minimum amount that is to be maintained in the account. Some banks calculate it on quarterly basis, while some have moved to monthly system.

Here it’s important for you to check with your bank about the periodicity of the average minimum balance requirement. If you fail to maintain it, the bank would be deducting charges from your account as penalty.

Is this criterion applicable to even small bank accounts?

Small Savings Bank accounts don’t fall under the ambit of the norm. But incidents are rampant in banks where such accountholders too are charged for breaching the minimum balance threshold limit. This is what has been  an irritant to the accountholders as they call it ‘breach of trust’ displayed by banks.

Actually banks have tailored a series of savings bank account schemes for different segments of customers depending upon their economic status. It’s here the problem surfaces. One such type of Savings Bank account is Basic Savings Bank Deposit (BSBD) account, which was earlier called as no-frill account. This account has been tailored especially for low income groups and for those who don’t want to come under the ambit of minimum average balance. But banks have been applying the minimum average balance norm in these accounts 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 most of the times do it erroneously. But the fact is that such account holders are penalized and they lose their money for none of their fault.

Notably, the BSBD/small account is the basic Savings Account that offers certain minimum facilities, free of charge, to the account holders. Such accounts are primarily aimed at enhancing financial inclusion among the economically weaker sections.

Who can open a Basic Savings Bank account?

Anyone can open BSBD account by submitting regular KYC (know-your-customer) documents. Even a customer can request the bank to convert his existing Savings Account into a BSBD. Rules envisage that the regular Savings Bank Account is to be closed within a month’s period from the date of opening a BSBD account.

Precisely, those who are finding it difficult to maintain the minimum average balance in their regular savings account, they should consider opening a Basic Savings Bank Deposit account. The interest rate will be the same as that on the regular savings account. All regular features including deposit and withdrawal of cash at bank branches as well as ATMs, cheque book facility (payable at par or multi-city) and online funds transfer are  available in the account. These facilities will be provided without any charges. Even debit card facility would be provided to the account holder.

What are common services charges  to be paid by the accountholder?

There are of course some bank charges that all of you should know about.

Obtaining a duplicate account statement also attracts charges. Here you have a choice to cut down these kind of charges. Take route of digital services to obtain your duplicate account statement. The banks will give you 50% or above rebate in such charges.

Banks also charge you for  dishonoured cheques. If a cheque which is drawn on bank or deposited with bank is returned for want of funds or any other valid reason, the bank would be deducting charges for the ‘dishonoured cheque’. The charges differ from bank to bank.

Don’t be surprised if your bank charges you for cash transactions. There are banks who would charge you for making unlimited cash deposits or even withdrawals. Besides, there is also a fee charged to a bank customer, if he/she conducts transactions at home as well as non – home (other banks’) ATMs beyond the threshold limit of such transactions per month.

You must remember that you debit card is not free from charges. These charges, which are annual in nature, are deducted immediately after the card is issued. If the card is lost or damaged, you will have to pay additional charges for the new one.

Using electronic mode of funds transfer like National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) too attracts charges. International transactions cost a few percents more because of the currency conversion charge. If you make payments abroad through debit or credit card, a charge of varying from bank to bank is added to the exchange rate

Swiping a debit or credit card at a petrol pump attracts the amount of surcharge. The charges vary from bank to bank. However, some banks offer you a cash-back in partnership with oil marketing companies.

SMS alert service is one of the best things that has happened entirely to the benefit of the accountholder. Now banks charge for the balance updates they send on cell phones. Some banks charge on quarter basis for the service, while some levy charges after the accountholder crosses threshold limit of free SMS alerts.

In today’s digital age, make best use of online transaction facilities. Avoid writing a cheque as much as possible. You may get some cheque leaves free of cost, buit after crossing threshold limit you will have to pay for each cheque leave.

While enjoying technology driven services which are entirely based on personal identification number (PIN)/password and user name system, ensure to be alert. Remember your PIN, passwords and usernames. Otherwise, every time you have to pay a fee for their regeneration.