It was in 2005 when the world was on a drive of promoting and developing financial inclusion measures, when India was introduced to the NO FRILLS ACCOUNT by the RBI. No frills account offered people to have account and get minimum banking facilities even with zero balance. Hence, these accounts came to be known as zero balance accounts.
This drive of reducing the distance between people and formal banking services got a boost and gained tremendous success in India over the period of years. And therefore as a part of financial inclusive measures, the RBI swapped the no frills account with the BASIC SAVINGS BANK DEPOSIT ACCOUNT (BSBDA). Basic Savings Bank Deposit Accounts significantly offered basic banking services like deposit and withdrawal of cash, money transactions through electronic payment channels and collection of cheques for free. All the accounts under the Pradhan Mantri Jan Dhan Yojna are BSBD Accounts.
All was good with the basic savings and deposits of these accounts only until it’s limitations on withdrawal were not questioned. According to the RBI guidelines, the maximum withdrawal limit of the BSBD Accounts is of four withdrawals per month. This includes withdrawals from almost all the sources like ATMs, RTGs, NEFTs, branch cash withdrawal and also EMIs. This disadvantage of the BSBDA was highlighted by Ashish Das in an IIT Bombay technical report. Das has been researching for years on the issues and impacts of the efforts that have been taken in the development process of financial inclusion. Das, while questioning the ‘Digital India’s’ progress, pointed out, “Inhibiting the financially included folks to transact digitally through their bank accounts is a blow to our country’s digital payments drive. The very nature of the RBI regulations has forced banks to limit the BSBDA usage.”
This issue gave way to several others as RBI leaves it to the banks whether or not to charge account holders on additional withdrawals. According to a TIMES OF INDIA report, banks like HDFC and Citi bank started converting the BSBDA into regular savings accounts on exceeding the limit of withdrawal. The report also states that banks like State Bank of India (SBI) and Axis Bank freeze the BSBD accounts in order to prevent the customers from exceeding he limit of 4 transactions. This issue has also risen worries in the Mahatma Gandhi National Rural Employment Guarantee (MGNREG) workers as they are the ones who receive their wages on weekly basis in these accounts.
These disadvantages have the whole aim of free basic banking services of the BSBDA crushing as the account holders are indirectly paying one way or the other for not maintaining the minimum balance. The main motive of connecting the rural unbanked population to the formal banking system is at stake due to these disadvantages, considering majority of BSBDA account holders are daily or weekly wage workers. The report by Ashish Das suggests that RBI should make it unlimited withdrawals through electronic payment methods for BSBDA account holders. It is also suggested that RBI must increase the number of withdrawals and strictly ask the banks to keep the pricing minimum on the additional services offered and educate the account holders at the time of bank account opening.