Non-maintenance of minimum balance is set to become a costly affair, as some of the private lenders have revised their charges effective 1 August. While Axis Bank and Kotak Mahindra Bank will charge a penalty based on the type of account, Bank of Maharashtra has increased its minimum balance requirement from ₹1,500 to ₹2,000.
Most major banks charge for non-maintenance of minimum average balance (MAB), and with the government’s waiver on banks charging this penalty ending in June, many of us might end up paying for letting our account balance dip. In this scenario, a zero balance account might be just the thing you need.
If you’re a salaried employee, you probably already have a zero balance account. But you can also open it for personal use. These are called basic savings bank deposits (BSBDs) and most lenders offer them as a way to increase financial inclusion among the economically weaker sections of the society.
You can open a zero balance account by completing the know your customer (KYC) formalities. “Most banks offer a zero balance account where the MAB on monthly and a quarterly basis can be zero. Most often these are coupled with salary accounts. There are also stand-alone zero balance accounts that do not require you to maintain a minimum balance,” said Adhil Shetty, CEO, BankBazaar.
Banks offer the same interest rates on BSBDs as they do on regular bank accounts.
However, BSBDs come with some restrictions. For instance, if you want to open a zero balance account with the State Bank of India, you will not be allowed to hold other savings accounts with the bank. If you already have one at the time of opening the zero balance account, you will be asked to close it within 30 days of opening the BSBD account.
You can expect BSBDs to have limited facilities compared with regular accounts as these are supposed to be “no frills”. “While there is no difference between the functions of a zero balance and a savings accounts, the facilities offered differ from bank to bank. Also, at times, zero balance accounts tend to be basic accounts with very few features. For instance, there could be transaction limits and a limit on the number of withdrawals per month,” said Shetty.
SBI’s BSBD account allows a maximum of four transactions in a month, whether it is withdrawing cash from ATMs or transferring money through NEFT or RTGS and so on.
The rules vary from bank to bank. “Each bank has its own policy, but generally, regular accounts enable internet banking and mobile banking, and allow you to operate the account from any branch. They also let you convert money from your savings account into fixed deposits, thereby increasing interest earnings. Other perks include no charge on cash transactions or cheque book, and having the option to open a demat account,” said Raj Khosla, founder and managing director, MyMoneyMantra, a financial services provider.
If you need an account for basic functions that will free you from having to worry about your bank balance running low, you can opt for a zero balance account. But keep in mind that you might have to sacrifice many of the facilities and conveniences offered by regular savings accounts.