When banks first opened, there was rampant speculation about their safety. Would the money you put into banks be safe? Wouldn’t it be more reassuring to have all your cash stashed up at home so it could always be close to you? As time went by and people realized that banks offered not only additional security but also attractive options to help your money grow, more people started opening bank accounts. But even today, many sections of the Indian society shy away from opening accounts because they’re worried they won’t be able to maintain the required minimum balance. The account maintenance charges are another deterrent. Enter basic savings bank deposit accounts.
These accounts aim to improve financial inclusion in India by letting economically weaker sections of the society avail the advantages of banking institutions without fretting about a minimum balance.
What Exactly is a Basic Savings Bank Deposit Account (BSBDA)?
A BSBDA account is a bank account where you can deposit your monthly savings without having to maintain a minimum balance. You don’t even need a minimum balance while opening such an account. Such account holders receive all the advantages of a savings account, i.e., an ATM card, a passbook, and similar interest rates. Many banks also offer a chequebook. You can use the money deposited in this account to open a recurring deposit or even transfer money to your family and friends overseas.
The Government of India announced the provision for BSBDA under the Pradhan Mantri Jan Dhan Yojana (PMJDY) in August 2014. It was launched by the Department of Financial Services (DFS), Ministry of Finance. The Reserve Bank of India (RBI) has mandated that all banks must provide for these accounts without imposing restrictions on age, income, etc.
Benefits of a BSBDA Account
The most apparent benefit of a BSBDA account is that it is a “zero balance account” with no strict regulation about a minimum balance. But it comes with several other benefits too:
- The bank cannot levy any charges if your BSBDA account is non-operational or inactive.
- The bank provides an ATM debit card free of cost. You can use this ATM card to withdraw money from any branches of the bank, just like regular ATM cards. You don’t have to pay a maintenance fee for this card.
- The account holder does not need to pay an annual service charge for the account.
Limitations of BSBDA Accounts
While these accounts clearly have a plethora of benefits for the masses, they do come with a few restrictions:
- You can undertake only four debits in a month. This includes debits via the ATM, directly from the bank, or through electronic transfers. Balance inquiries will not be counted among the four allowed transactions. Note that there is no limit on the number of deposits.
- You can open only one BSBDA account in a particular bank.
- You cannot have any other savings bank deposit accounts within the same bank where you have the BSBDA account. If you already have one, you must declare this to the bank and close it within one month (30 days) from the date of opening of your basic savings bank deposit account.
Eligibility for Opening a BSBDA Account
The provisions of a BSBDA account are open to all. Say, if you’re looking at an SBI bank account opening with zero balance, you only need to fill up a KYC form and submit the required documents (enlisted in the sections below). It is also possible to convert your existing savings account with a bank into a BSBDA account.
Note: These accounts are not usually open to NRIs (Non-Resident Indians). Some banks also disallow HUF kartas and minors from holding such accounts.
Documents Required for Opening a BSBDA Account
You will require these documents to open a BSBDA account with a bank:
- KYC or Application Form
- Identity Proof (e.g., Passport, PAN Card, Voter ID, Aadhaar Card, Driving Licence, or Job Card)
- Address Proof (This is the same as above. In 2014, the RBI relaxed the KYC norms to let people submit a single document as both identity proof and address proof)
- Passport-size photographs
Note: Some banks may also demand proof of employment before opening a bank account. However, this is not mandated by the RBI, and you should be able to open a zero-balance BSBDA account with only the above documents.
What is a BSBDA-Small Account?
A variation of the BSBDA account is the BSBDA-Small Account. If you use a liberal KYC, say, you don’t have a suitable ID proof, you can open a BSBDA-Small Account. To do this, you can request the Branch Manager of the bank to grant you an extension of 12 months to submit the ID proof. At the end of 12 months, you will either have to provide the ID proof or submit evidence that you have applied to the required authority to obtain your ID proof.
A BSBDA-Small Account is similar to the BSBDA in every respect, but it comes with a few additional limitations:
- The four debits that you are allowed in a month can amount to a maximum of INR 10,000.
- The maximum amount you can credit in a BSBDA in one year is INR 1 lakh.
- The maximum amount you can have in a BSBDA at any time is INR 50,000.
Overview of BSBDA Accounts in Major Banks in India
So, which bank should you choose to open such an account? Let’s compare the advantages you can expect in three of the leading banks of the country—HDFC, ICICI, and SBI.
| Banks | |
| Eligibility | The RBI advises banks not to impose any restrictions for the opening of BSBDA accounts. However, the eligibility criteria can differ from bank to bank:
|
| Minimum Balance | You don’t have to maintain a minimum balance in any of the three banks. For example, the State Bank of India minimum balance requirement for a BSBDA is zero. |
| Documents Needed for BSBDA | All three banks require the following documents:
|
| Documents Needed for BSBDA-Small Account | All three banks require the same documents. For example, for an HDFC bank online account opening with zero balance, you must submit:
|
| Interest Rate | Most banks provide the same interest rates on BSBDA accounts and BSBDA–Small Accounts as they do on regular saving accounts. HDFC and ICICI offer an interest rate of 3.5% for deposits below INR 50 lakh and 4% for amounts above INR 50 lakh. SBI offers 3.5% interest for amounts up to INR 1 crore and 4% for amounts above this. |
| Charges | All three banks offer a free ATM Rupay debit card, free NEFT/RTGS, and a free chequebook. None of them charges an account maintenance or closure charge. |
As is evident from this table, most banks offer similar features when it comes to BSBDAs. It is a good idea to choose a bank where you or your family members have other financial operations. You can also consider transforming your existing savings account with a bank into a BSBDA.
Should You Open a BSBDA Account?
BSBDA accounts were originally launched to cater to the economically weaker sections of the society. However, they can be beneficial to many audience groups. Consider opening a BSBDA if:
- You have multiple bank accounts and struggle to meet the minimum balance requirements of each. You can streamline your expenses by opening a BSBDA account with limited transactions and maintain a separate account for frequent debits or payments through digital wallets.
- Have recently started your career and find it difficult to keep the minimum balance in your account due to expenses such as rent, food, etc.
- Are a senior citizen who draws a pension.
- You are a student who wants to open an account to save money earned through scholarships, gifts, etc.
The launch of basic savings bank deposit accounts is a welcome step toward improving financial inclusion in India. It promotes the habit of saving and streamlining your transactions while freeing your mind of the anxieties surrounding maintaining a bank account. Go ahead and avail of the advantages of a BSBDA or a BSBDA-Small Account and watch your wallet give you a happy smile.
