De-jargoned | Small accounts2 min read . Updated: 14 Jun 2011, 09:28 PM IST
De-jargoned | Small accounts
De-jargoned | Small accounts
Life may became a bit easier for your domestic staff. According to a recent notification by the Reserve Bank of India (RBI), job cards issued by the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) duly signed by an officer of the state government and letters issued by the Unique Identification Authority of India containing the name, address and Aadhaar number of the applicant can also be used as officially valid documents to open a bank account. However, accounts opened only on the basis of either or both these, will be treated as small accounts.
What are small accounts?
A small account is nothing but a savings account that can be opened with any bank. In order to open such an account, all you need is a self-attested copy of your passport size photograph, apart from the NREGA card or UID number. However, the designated officer at the bank who processes the opening of your account has to certify under his signature that the signature or thumb impression of the account holder was affixed in his presence. Though the documentation is relaxed, the account comes with many limitations.
The documents will support the account for 12 months only. After that, you will have to produce the documents that are normally considered valid proofs of identity and address to open a savings account. The small account can be renewed for another 12 months if you provide evidence to the bank that you have applied for the documents. The bank will review the status of the account after 24 months. If you are unable to produce the required documents even 24 months down the line, then the banks will most likely close your account.
Besides, only a bank with core banking facilities or branches where it is possible to manually monitor whether the operations done from the account are within the imposed limits and restrictions are allowed to open small accounts.
The account offers basic features such as issuing a passbook, but debit cards and cheque books are optional in most cases. Some banks don’t offer cheque books as those opening the account don’t have proof of signature.
No foreign remittances are allowed in such an account. The maximum balance you can maintain in it at any given point of time is ₹ 50,000. Besides, the total of all withdrawals and fund transfers from the account should not exceed ₹ 10,000 per month and the total limit on all the transactions done through the account in a year should not be higher than ₹ 1 lakh.
How is it different from a no-frills account?
Both the accounts were introduced to take formal banking services to the financially excluded segments of the population. However, a no-frills account requires you to have all the necessary address and identity proofs; the good part is there are none of the restrictions imposed on a small account.