RBI asks banks to kick off no-frills accounts

The Reserve Bank of India (RBI) today asked banks to make available basic 'n-frills' banking accounts, as the current practices of minimum balances as well as charges tend to exclude a vast section of population from banking.

With a view to achieving the objective of greater financial inclusion, all banks are advised to make available a basic banking 'no-frills' account either with zero or low minimum balances as well as charges that would make such accounts accessible to a greater number of people.

The RBI views the requirement of minimum balance and charges levied as a deterrence to a sizeable sector of population from opening or maintaining bank accounts. All banks have been directed to take immediate action and report compliance within a month.

The RBI said the nature and the number of transactions in the 'no-frills' accounts could be restricted but made known to the customer in advance in a transparent manner. It further asked banks to give wide publicity to the facility of such a (no-frills) account including detailed information on their websites indicating the facilities and the charges in a transparent manner.

The RBI has been expressing concerns over customer services at banks and has made it clear that bankers can no longer get away with harassment to customers and denial of their rights.

RBI governor Y V Reddy has even pointed out that two Indian banks have collected around Rs 100 crore as penalty charges from customers for not maintaining a minimum balance.

Banks will have to report to the RBI on the number of such deposit accounts opened, on a quarterly basis.