banks are not interested in no frills accounts : BCSBI

Mumbai, Sept. 16 The financial inclusion drive by banks through the opening of ‘no-frills’ accounts leaves a lot to be desired, especially in the case of the urban poor.

The Banking Codes and Standards Board of India (BCSBI) has found that bank staff were generally unwilling to open such accounts for people of small means.

It has remarked on the poor awareness of banking staff about the relaxed know your customer (KYC) norms for opening of these accounts.

A study carried out by the board through incognito visits to 44 branches of 26 banks across Mumbai earlier this year confirmed its suspicion that banks in the urban areas are reluctant to open ‘no-frills accounts,’ that is, savings bank accounts with either nil or very low minimum balances and entailing low charges.

“At the outset, most of the branches did not come forward to open ‘no-frills’ accounts in the names of persons of small means, say, a maid or a driver.

“When it was mentioned that there are some savings accounts with limited facilities for people with low income, the staff expressed unwillingness to open such accounts, if the customer was not in a position to produce documents such as PAN card, voter’s ID, postal ID, and so on, as proof of identity and address,” said the board in its report.

Ms K. J. Udeshi, Chairperson, BCSBI, in a recent address, wondered what risks a bank would face when the balances in all the accounts taken together by the ‘no-frills’ account holder cannot exceed Rs 50,000, and the total credit in all the accounts taken together cannot exceed Rs 1 lakh in a year.

“Why can we not permit the opening of no-frills accounts on the basis of a simple self-declaration form regarding identity and address with photograph? Look at the post offices. Only one introducer from that particular post office is required. The account holder has cheque facility and can withdraw money,” she said.

When it comes to proof of identity and address, almost everyone knows everybody else in a village, such is not the case in urban areas.

As per the Board’s survey, none of the branches of foreign banks and those in SBI group visited were willing to open ‘no-frills’ accounts with relaxed KYC documents. The number of branches showing unwillingness to open ‘no-frills’ account was 12 out of 21 in the case of public sector banks (PSBs); five of nine in the case of new private sector banks; and three of five in the case of old private sector banks.

Officials in over 63 per cent of the branches visited were unaware of the RBI instructions on the simplified procedures for opening ‘no-frills’ accounts. It is estimated that as on March 31, 2009, over 3.3 crore ‘no-frills’ accounts have been opened by banks.

(from BUSINESS LINE)