Can BSBDA Depositors have Long Innings? - Be Aware and Remain Vigilant
The Basic Savings Bank Deposit Account (BSBDA) is a RBI mandated savings product that provides to the customer facilities of (i) unlimited credit, (ii) four debits every month, (iii) zero minimum balance, and (iv) no service charges. With more than one-third of the savings bank accounts being BSBDAs, the banks have done a remarkable job for opening such accounts. Nevertheless, there are certain design issues with the BSBDA product that make it restrictive for customers and not commercially viable for banks. This note has been prepared to facilitate the regulator and the government to come out with meaningful corrections, while taking forward BSBDAs. Banks have manoeuvred through the design anomalies of the BSBDA product, and as a result, many banks have already overcharged gullible BSBDA customers, or are still charging, in violation to the RBI’s extant regulation. We showcase how banks are quietly converting a no-fee BSBDA to a fee-based regular account having high minimum balance requirements, the moment a BSBDA customer carries out 5th digital payment transaction in a month. The account gets converted to a regular savings account and remains converted thereafter. The disclosures of incorrect service charges for BSBDA on the banks’ websites and imposition of the same to the customers persisted despite the regulator being aware of it. Apparently, the bank supervisor has faulted in clear understanding of the complex regulation and therefore in carrying out effective supervision. Issues of consumer education and consumer protection were also found wanting. By not ironing out the design issues, RBI has created irrational impediments in the financial inclusion drive of the country – whether in form of inhibiting digital payments or through promoting cash usage by disallowing banks to charge beyond a certain monthly quantum (in value terms) of cash deposits. RBI’s tenacity to avoid addressing the same, or lack of zeal to examine and provide explanations, is detrimental to the interest of about 280 million active BSBDA customers and of the banks.
- Technical Reports