Question

The difference between basic and non-basic banking systems?

Answer 1

The Reserve Bank of India (RBI) has taken several measures to ensure the most basic banking facilities are made available to the Indian population. Very often, individuals from low-income backgrounds rarely ever have bank accounts where their finances can be saved. This is largely because opening a savings account in most banks includes having to maintain a minimum balance in your account at all times. If the balance of the savings account dips below the required minimum balance to be maintained, the bank usually levies a fine.

In an attempt at financial inclusion, the RBI launched the “No Frills” account in 2005. The No Frills account aimed to offer the most basic banking service to those from the low-income backgrounds. The concept was formulated as means of providing individuals from low-income backgrounds the opportunity to benefit from the credit and savings programs offered by most financial institutions.

With all the above-mentioned factors considered, the No Frills account was launched and it allows its holders the ability to open and maintain a savings account with zero balance. Those who hold No Frills accounts are offered basic banking services such as mobile and internet banking, a free Debit Card and access to ATMs all over the country. In addition, No Frills account holders also have the option to receive free quarterly account statements to their registered email id. In addition, the service charges applicable to the No Frills account were substantially lower than that of the regular savings accounts. As a result of the zero balance requirement that most banks offered, the account became commonly known as a zero-balance account.

Since its launch in 2005, the No Frills accounts began to receive a large number of applicants. However, the title “No Frills” seemed to stigmatise those who hold such accounts. In an attempt to undo the stigmatisation associated with the title, the RBI replaced the title of the account to Basic Savings Deposit Account (BSDA) in 2012. Therefore, the No Frills account and the Basic Savings Deposit Account are essentially the same thing.