In an effort to make banking facilities available to all, especially those hailing from the rural and semi-urban areas, the Government of India rolled out the zero-balance savings account through the Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme. Since then, banks across the country have also rolled out zero-balance accounts or in other words the Basic Savings Bank Deposit accounts (BSBDA). For those who do not want to go through the hassle of maintaining a minimum monthly average balance, they can opt for a zero-balance savings account. This can be done provided that the customer does not hold a regular savings account with the same bank. A zero-balance savings account can be opened by an individual with minimum documentation and in some cases just with a fingerprint or signature and photograph of the individual. In this case (for just the fingerprint, signature and photograph as verification), the individual opening the account will be required to submit the KYC documents within a year from opening the account. That said, listed below are some of the pros and cons of opening a zero balance savings account.
Pros of opening a zero-balance savings account
Listed below are some of the benefits of opening a zero-balance savings account:
- A zero-balance savings account does not have a minimum balance requirement. In other words, customers holding such an account do not have to maintain a required average or quarterly balance in their account to avoid a penalty for non-maintenance.
- On opening the zero-balance savings account, customers are granted a free debit card that can be used to make transactions across the country.
- Customers are also granted a free cheque book when opening the account.
- Zero-balance account holders are granted a passbook to regularly check the balance in their account.
- Zero-balance savings accounts come with the privilege of the internet banking facility. Through this facility, customers can check their balance, transfer funds from one account to another, recharge their mobiles or DTH set top boxes, pay their bills, etc.
- Customers are allowed a certain number of withdrawals (between 3-5) from other bank ATMs.
- On opening the zero-balance savings account, customers are eligible for a personal accident insurance cover up to Rs.1 lakh.
- For customers eligible for Government subsidies, they will receive the Direct Benefit Transfer straight to their zero-balance savings account.
- After six months of opening the account, customers can carry out the overdraft facility.
- The RuPay debit card that is granted to the customer when opening the account comes with a personal accident insurance.
Cons of opening a zero-balance savings account:
- Only residents of India are eligible to open a zero-balance savings account. NRIs (Non-resident Indians) and PIOs (Persons of Indian Origin) are not eligible to open this account.
- Since the zero-balance savings account can be opened with minimum documentation, at no point in a financial year can the total credit in the account exceed Rs.1 lakh.
- At no point can the balance in the zero-balance account exceed Rs.50,000.
- If the customer fails to make transactions for a specific period of time, the account will be deemed dormant. At this point, the customer will not be allowed to carry out any ATM transactions, transactions via the internet banking facility or via the phone banking facility.
- No foreign remittances can be made to the zero-balance savings account.
As already highlighted above, the concept of the zero-balance savings account was initiated following the Government’s Pradhan Mantri Jan Dhan Yojana (PMJDY) initiative. Such a move has given millions of citizens of the country access to banking facilities. In fact, in a week since the initiation of the Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme, it broke the Guinness world record for the most number of bank accounts that have been opened in a span of a week. While the benefit of minimum documentation and no requirement for minimum balance is a huge advantage for a good proportion of the country’s population, the zero-balance savings account comes with limitations as clearly mentioned above, which surely will be an impediment if you wish to utilize a savings account to save for the future or for retirement.