No-Frill Accounts Scheme

Subject – Economy

Context – ‘India now ahead of China in financial inclusion metrics’

Concept –

India is now ahead of China in financial inclusion metrics, with mobile and Internet banking transactions rising to 13,615 per 1,000 adults in 2020 from 183 in 2015 and the number of bank branches inching up to 14.7 per 1 lakh adults in 2020 from 13.6 in 2015, which is higher than in Germany, China and South Africa, as per a report.
Under the no-frills accounts scheme, the number of persons with deposit accounts at banks has significantly increased, becoming comparable with emerging economy peers and even some of the advanced economies.
The central bank had introduced ‘no-frills’ accounts in 2005 to provide basic banking facilities to poor and promote financial inclusion. The accounts could be maintained without or with very low minimum balance.
- However, in 2012, RBI asked banks to drop the ‘no-frills’ tag from the basic saving accounts as the nomenclature has become a stigma.
- It has asked the banks to provide zero balance facility in the basic banking accounts along with ATM-cum-debit cards without any extra charge.
- RBI has asked the banks to convert the existing ‘no-frills’ accounts into ‘Basic Savings Bank Deposit Accounts’.