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The Benefits and Drawbacks of Zero Balance Savings Account

Savings Account is one of the most important financial products. To open a savings bank account, you have to pay an initial deposit and maintain a minimum average balance. However, not everyone can maintain the minimum average balance. This is where zero balance accounts come into the picture.

In order to establish banking facilities for all, particularly those in rural and semi-urban areas, the Indian Government has introduced the Zero Balance Saving account i.e. Basic Savings Bank Deposit Account (BSBDA) under Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme.Since then, banks around the country have introduced zero balance accounts or BSBDA. Individuals can now easily receive government subsidies in these accounts. Individuals would require valid KYC documents to open the account. People without KYC documents can open a small basic savings account. However, the valid documents should be submitted within 12 months.

BSBDA is one type of zero balance account. In the last few years, banks have launched zero balance savings accounts that can be opened online without any paperwork. Individuals can open these accounts easily through PAN and Aadhaar card. As the account is opened online through the Aadhaar OTP verification, customers have to visit the bank branch or schedule an appointment to get their KYC documents verified. Nowadays, many banks such as Kotak Mahindra Bank and ICICI Bank have introduced video KYC that allows customers to open a full fledged savings account without leaving their home. 

Now that we have seen the two important types of zero balance savings accounts: BSBDA and online savings accounts, let us understand the pros and cons of these zero balance accounts.

Pros of zero balance savings account:

Here are some advantages that a zero balance savings account can offer:

No minimum balance commitment: There is no minimum balance commitment in a zero balance account. In other terms, consumers who maintain such an account do not need to keep a required average monthly balance.

Debit card: When the zero-balance savings account is opened, basic savings account consumers get a free RuPay debit card that can be used to withdraw cash and make payments. Depending on the bank, in case of online savings account, account holders get a VISA or RuPay debit card. These debit cards come with free insurance cover.

Cheque Books: When opening a basic savings account, consumers get a free cheque book. However, customers of online zero balance accounts have to pay a nominal amount for cheques. One can use cheques as a bank identification document.

Net Banking: Zero balance account holders can avail the Internet Banking facility. Customers can then review their balance, move funds from one account to another, reload their mobiles or recharge their  DTH, pay bills, etc.

Cash withdrawals: Basic savings account holders can withdraw a maximum of four times in a month, including cash withdrawal through Branch, ATM, NEFT, RTGS, IMPS, etc.

Online zero balance account holders can withdraw cash from ATMs up to five times without any charges.   

Receive government subsidies: Accounts linked to Aadhaar can receive direct government subsidies such as LPG subsidy and scholarship. .

Overdraft: Customers can avail overdraft service after six months of opening the accounts.

Disadvantages of Zero Balance Savings Account

  • Only Indians can open a zero-balance account. This account can is not opened by NRIs (Non-resident Indians) and PIOs (Persons of Indian Origin).
  • Online zero balance accounts have an initial balance limit of Rs.1 lakh. These restrictions can be removed after the KYC process.¬†
  • Foreign contributions cannot be made to zero balance accounts.

Conclusion:

Zero balance savings account can be a good saving option for individuals who don’t want or cannot maintain any minimum average balance.

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