What is a Zero Frills Bank Account

• 22 November 2017 | 1538 Views | By Mint2Save

In order to compensate for the services that the bank provides, the customers are usually required to maintain a minimum average balance in their accounts. However, there are many people in India who are unable to maintain a minimum balance in his or her bank account due to insufficiency of money. So, Reserve Bank of India has introduced an account which does not require any minimum balance. This minimum balance scheme has been popularised by various Banks as no frills bank account.

Most of the economic experts are of the view that this account will benefit a large mass of population and mainly those who do not have sufficient amount of money to save in the bank. If a person is unable to maintain a balance or has a balance which amounts to zero, then, it will not be an issue. The bank will never charge any fine or penalty in lieu of that balance. There are no such service charges which are levied in a no frills account.

In India, there are many people who work in an unorganised sector and earn wages on a daily basis. For this section of people, maintaining a minimum balance in the savings account of a bank is something which is impossible. So, this portion of the population feels safe to keep their wages in the form of cash in their own homes. Their condition is as such that they could not even dream of a savings account in any bank. So, after much thought process, Reserve Bank of India instructed each and every bank to start a no frills account which would have all the basic facilities of the bank and would not have any requirement for keeping or maintaining a minimum balance. It would also be devoid of any kind of service tax whatsoever.

Now there is a question. What is the difference between a no frills account and a zero balance account ? Why can’t the zero balance account be known as a no frills account ? The answer is very simple. Every No Frills Account can be a zero balance account, but the opposite is not always true. There are some basic differences between a no frills account and a zero balance account. A no frills account is in reality a zero balance account in which there is no need to maintain a minimum balance and no taxes are levied if there is nil balance. On the other hand, a zero balance account can be opened with nil balance but after some time there might be a need to fulfil the minimum balance requirements of the particular bank and the bank might charge a penalty or a fine for not maintaining the account.

Further in a no frills account, there are caps in terms of bulk deposits and withdrawals. A customer holding a no frills account is restricted in terms of deposit as well as withdrawals.

One of the most common types of zero balance accounts is a salary accounts, where there are no cappings and limit on number as well as amount of transactions.

There are various kinds of guidelines for having a no frills account which were mentioned by the Reserve Bank of India. They are as follows:

1. The no frills account must be considered to be a normal banking service which should be available to each and every customer who is willing to open a no frills account.
2. The no frills account must not have any requirement of any kind of minimum balance.
3. A person who avails a no frills account must have the facility of withdrawal and deposit of cash at the branch of the bank as well as at the ATM counters.
4. The banks must avail the facility of receipt and credit of money to their respective no frill accounts by the usage of electronic channels of payment.
5. The no frill account holders also have the right to avail the facility of deposition and collection of cheques the agencies of Central and State Government departments.
6. The banks have no right to impose any kind of limit for the number of deposits which can be made in a month.
7. There is a small restriction in case of withdrawing the money from the no frills account of the bank. The banks can impose a maximum of four transactions of withdrawals which can be made by the usage of cheque. The withdrawal of money can also be done by the usage of the facility of the ATM cards and ATM cum Debit cards which can be availed by the banks to its customers who possess or are willing to possess a no frills account.
8. All the facilities which are availed by the bank to its no frill account must be free from any kind of charges.
9. The banks cannot levy any kind of fees or penalty from the people who avail the  facility of a no frills account even if they are unable to deposit or maintain any kind of balance in their account.
10. No charge can be levied on the person availing a no frills account even if they do not operate or activate any kind of inactive account which are related to the basic savings account.
11. The banks have the full right and authority to evolve other requirements which include the structure of the pricing of the additional value added services which are beyond the stipulated basic minimum services on a reasonable and transparent basis and which are applied on the manner which are absolutely free from any kind of discrimination.
12. The no frills account holder is absolutely liable to follow the strict rules and regulations which are made and regulated by the directive principles of the Reserve Bank of Account.
13. The no frills account holder is subjected to follow the strict instructions of the Reserve Bank of India on Know Your Customer or better known as KYC and Anti Money Laundering or better known as AML which are mandatory for opening a no frills account and the details of the customer must be updated on a time to time basis. All these are done for availing the smooth functioning of the banks.
14. If any customer opens a no frills account, he or she will not be eligible for opening any other account with that particular bank.

So, these are the features of a no frills account. Isn’t it a great idea for saving the hard earned money of the poor people ?