Benefits of Zero Balance Savings Account

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Many banks have begun offering zero balance savings account to increase their customer base. Not many are aware that the zero balance savings account is actually the latest avatar of the no-frills account. The motivation behind the launch of this product is quite interesting.

People who belong to the low-income strata may not be able to keep a minimum average balance in their account for various reasons. Many of them are daily wage workers or earn a low salary. Until now, banks were not very keen to offer banking products to these people since the average balance they brought to the bank was low.

The launch of the Pradhan Mantri Jan Dhan Yojana and the magnitude of deposits that the scheme brought in changed the equation. Banks woke up to the fact that maybe the low-income group might be an attractive customer base after all. However, banks are not the only ones who benefit from such accounts. There are many incentives to customers who buy into these products as well. We’ll see some of them now.

These accounts have no minimum average balance requirement

A typical savings bank account requires the account holders to maintain a certain sum in their account every month, also called minimum average balance or MAB. But there is no such requirement in zero balance savings account, which makes it attractive to those who can’t afford to keep a minimum balance in their account each month.

No penalties if a minimum average balance is not maintained

In a typical savings bank account, if you don’t maintain a MAB in your account, you will most likely be penalized. The penalty will depend on the difference between your account balance and the MAB. This penalty is often steep which can be very expensive for someone who belongs to the low-income strata. With zero balance savings account, there is no such penalty.

You continue to enjoy interest on your account balance

When it comes to interest accrual, the zero balance savings account is no different from a typical savings account. You will continue to enjoy interest on your balance. Some private banks, like Kotak Mahindra Bank, offer as much as 6% interest on savings accounts. But please check with your bank to confirm the interest rate.

Free online funds transfer

Many people like to use net banking (NEFT/IMPS/RTGS) for its various benefits. You will be happy to learn that you can continue to use net banking on your zero balance savings accounts too. But please note, in most cases, you will be charged for conducting fund transfers through a bank branch.

Free passbook, cheque book and ATM/Debit card

Some banks, especially public sector banks provide their zero balance savings account customers with a free passbook, cheque book and ATM/Debit card. Other banks (most private banks) will charge a nominal fee for these services. But these fees are usually low because the bank is mindful of the low-income base of the customer, as well.

Zero balances savings accounts are here to stay. You will appreciate this fact better when you realize that as of December 7, 2017, India’s banks have cumulatively opened more than 30 crores Jan Dhan or zero balance accounts, including more than 18 crore accounts in rural and semi-urban areas. So go ahead and open a zero balance savings account.

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