In our country, we have a stark distinction between the rich and the poor. Small accounts were created to bring financial inclusion to India. It is a bank account designed to help people become more financially included. It provides low-cost basic banking services. In a modest account, an ATM card is provided. They have replaced all “no-frills” accounts and  KYC standards are being reduced.  

Definition & Objectives of Small Accounts

The Basic Savings Bank Deposit Account (BSBDA) is a bank account created to boost financial inclusion by offering basic banking services at low costs. In a BSDA/ small account, there is no need to have some minimum balance.

The following are the major and basic features of the small account:

  • There is no minimum balance required, as is the case with other types of accounts.
  • It’s a standard financial service that anyone can use. It is not reserved only for the poor, anyone can open a small account. 
  • Services comprise bank deposit & withdrawal of money at bank branches, as well as the use of an ATM card.
  • There is no cap on the number of deposits that could be made in a month; however, withdrawals are limited to four per month.
  • ATM card / ATM-cum-Debit Card facility is given in the small account

The bank provides these services at no cost to the customer.  Activation of an inactive ‘Basic Savings Bank Deposit Account/small account’ is also free of cost.

No-Frills Accounts

Accounts with no-frills– Previously, banks would offer ‘No-frills’ accounts for balance accounts that have zero balance. The Reserve Bank of India decided to come up with the Basic Savings Bank Deposit Account (BSBDA)/ small account due to its naming tradition, which indicates “providing only a basic service to keep expenses down” 

All “no-frills” accounts have been changed to small accounts/Basic Savings Bank Deposit Accounts (BSBDA).

Important Points to Consider When Opening a small account/ Basic Savings Bank Deposit Account (BSBDA)

  • In a single bank, an individual can open one ‘Basic Savings Bank Deposit Account.’ only. 
  • A person who has a ‘small Account’ with a bank is ineligible to open any other bank account which is a savings account with that bank. If he has an existing account, he must remove it within 1 month.
  • However, a person who owns a ‘Basic Savings Bank Deposit Account’ can have a Fixed Deposit account, Recurring Deposit account and other accounts in the bank.
  • The BSBDA Account/ small account includes a free Passbook.
  • Small Accounts are only available at CBS-affiliated bank branches.

KYC requirements for BSBDAs are being relaxed.

When a BSBDA account/small account is opened via Simple KYC, it is referred to as a “BSBDA-SMALL account.” The ‘BSBDA-Small Account’ is subject to the terms: 

  • The sum of all credit in a fiscal year does not surpass Rs. 1 lakh
  • The sum of all transactions (withdrawals and debits) every month does not surpass Rs. 10,000 
  • The account balance at any given moment does not surpass Rs 50,000.
  • Small accounts/ BSBDA are valid for 12 months /1 year at first but can be prolonged for a further 12 months if the individual can show documentation of applying to an Officially Acceptable Document. 
  • Small accounts can be started at CBS-affiliated bank branches only.

Conclusion

BSBDA there is no minimum balance required. All ‘No-frills’ accounts have now been changed into small accounts/Basic Savings Bank Deposit Accounts with a monthly withdrawal limit of four. In a bank, an individual can have one BSBDA account only. A person with a BSBDA account can not have any other Savings account at the same bank. A person with a BSBDA account can have fixed deposit/RD accounts at the same bank. Thus, although it has its terms and conditions attached, ultimately they are in place to create financial inclusion in India and to benefit people at the grass-root level.