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What Is a Zero Balance Account (ZBA)?

A zero-balance account (ZBA) is pretty much exactly what it sounds like: a checking account in which a balance of zero is maintained. When funds are needed in the ZBA, the exact amount of money required is automatically transferred from a central or master account. Similarly, deposits are swept into the master account daily. Corporations sometimes use zero balance accounts to ensure that funds are readily available throughout different departments, to eliminate excess balances in separate accounts, and to maintain greater control over the disbursement of funds. These accounts handle items such as payroll, petty cash and other similar needs.

KEY TAKEAWAYS

  • A zero-balance account (ZBA) is an account in which a balance of zero is maintained by transferring funds to and from a master account.
  • ZBA accounts are not consumer products but are used by larger businesses.
  • An organization may have multiple zero balance subaccounts.

How Zero Balance Accounts Work

The master account provides a centralized place to manage an organization’s funds. Whenever funds are required in the ZBA checking account to cover a charge or transaction, they are transferred from the master account in the exact amount required. There is no need for an employee to do this manually, as the process is fully automated.

By concentrating funds in the master account, more money is available for investments, rather than having small dollar amounts idle within a variety of subaccounts. Often, the master account has additional benefits, such as a higher interest rate on balances, compared to the subaccounts. The master account is not a checking account, but rather some other, more profitable type of bank account. Thus ZBAs maximize funds available for investment and minimize the risk of overdraft fees.

The ZBA’s activity is limited to the processing of payments and is not used to maintain a running balance.

Using a ZBA to fund debit cards issued by the organization helps ensure that all of the activity on the cards is pre-approved. Since idle funds are not present within the ZBA, it is not possible to run a debit card transaction until funds are supplied to the account. This can help manage business expenses by limiting the risk of unapproved activities taking place.

The use of a ZBA as a spending control mechanism is especially helpful when managing incidental charges across a large organization. While operational charges are often easier to predict and fund, incidentals can be variable by nature. By limiting quick access to funds via debit cards, it is more likely that proper approval procedures will be followed prior to the completion of a purchase. This permits easy tracking of transfers and reconciliation across accounts.

ZBA Special Considerations

An organization may have multiple zero balance accounts to improve budget management and make the process of allocating funds more efficient. This can include creating a separate ZBA for each department or function as a way to monitor daily, monthly, or yearly charges.

Other reasons for creating separate ZBAs might involve the financial management of short-term projects or those at particular risk for unexpected overages. The use of zero balance accounts helps to prevent excess charges without proper notification and approval.

What is a zero-balance savings account?

A Zero Balance Savings Account is a type of account where you are not required to maintain a minimum balance, i.e., your account balance can go down to Rs. 0 and it won’t attract any penalties.

It is one of the most difficult tasks to maintain a minimum balance in the account. A majority of banks in India keep a minimum balance limit of Rs. 5000 – Rs.10,000 per account to maintain. Such a requirement may become problematic for those of us who earn just enough to meet their requirements.

In such cases, Zero Balance Savings Account is an ideal option. Discussed below are some of the top zero balance savings accounts in 2022 for Indian Citizens. But first, let’s check out the interest rates of these zero balance accounts:

Account Name Interest Rate (up to Rs 1 lakh)
IDFC First Bank Pratham Savings Account 4.00%
YES Bank Smart Salary Advantage 4.00%
Kotak Mahindra Bank 811 Digital Bank Account 3.50%
IndusInd Bank Indus Online Savings Account 4.00%
Standard Chartered Bank Aasaan 2.75%
HDFC Bank BSBDA 3.00%
State Bank of India BSBDA 2.70%

Now, let’s find out how you can benefit from the above-stated zero balance accounts:

IDFC First Bank Pratham Savings Account

Account Name Account Balance Rate of Interest (% p.a.)
  <=Rs.1 lakh 4.00%
Pratham Savings Account >Rs.1 lakh and <=Rs 10 lakh 4.50%
  >10 lakh <=2 crore 5.00%

Features of Pratham Savings Account

  • It’s a BSDBA that can be opened by those who do not have a savings account in any other bank.
  • Unlimited ATM withdrawals with access to any micro ATM.
  • Daily ATM withdrawal limit – Rs. 40,000.
  • Comes with Rupay Classic Debit Card.
  • Complimentary personal accident insurance cover of Rs. 2 lakh.

YES Bank- Smart Salary Advantage

Account Name Account Balance Rate of Interest (% p.a.)
  Less than Rs.1 lakh 4.00%
Smart Salary Advantage Rs.1 lakh to less than Rs.10 lakh 4.75%
  Rs.10 lakh to less than 100 Crore 5.50%

Features of YES Bank Smart Salary Advantage

  • Only for salaried persons.
  • Free and unlimited transactions at any ATM across the country.
  • Get monthly 5 free transactions at any other bank’s ATM in India.
  • Comes with IMPS & UPI facility for quick money transfers.
  • Option to open free Demat account.
  • Complementary “Engage” debit card with ATM withdrawal limit of Rs. 75,000.
  • The debit card offers accidental death cover, lost card liability, and purchase protection.

IndusInd Bank- Indus Delite Savings Account

Account Name Account Balance Rate of Interest (% p.a.)
Indus Online Savings Account Up to Rs.10 Lakh 4.00%
  Above Rs.10 Lakh 5.00%

Features of Indus Online Savings Account

  • Complimentary Premium Debit Card.
  • Personal accident insurance of Rs. 2 lakh with Platinum Plus debit card.
  • 5% cashback when shopping on Amazon.in.
  • Choose the account number of your choice.
  • Online money transfers via NEFT / RTGS / IMPS.
  • Should have a valid mobile-linked Aadhar number and PAN to open this account.

Standard Chartered Bank- Aasaan / BSBDA

Account Name Account Balance Rate of Interest (% p.a.)
  Below Rs.50 Lakh 3.00%
Basic Savings Bank Deposit Account Above Rs.50 Lakh & up to Rs. 40 Crore 3.25%
  Above Rs. 40 Crore 0.50%

Note: Interest will be calculated at applicable Savings Bank Interest Rate on the daily available balance and the same will be paid at quarterly rests.

Features of Aasaan

  • Open your account instantly using Aadhaar based eKYC.
  • Free unlimited ATM withdrawals at any bank’s ATM.
  • Complimentary cheque book and debit card.
  • Free NEFT / RTGS transactions.

HDFC Bank- Basic Savings Bank Deposit Account (BSBDA)

Account Name Account Balance Rate of Interest (% p.a.)
Basic Savings Bank Deposit Account Below Rs.50 Lakh 3.00%
  Rs.50 Lakh & above 3.50%

Features of Basic Savings Bank Deposit Account

  • Free passbook facility for all individual account holders.
  • 4 free ATM withdrawals – no limit on the amount.
  • Complimentary Rupay debit card.
  • Regular e-mail account statements.
  • This can be opened only by those who are employees of a company with a salary agreement with HDFC Bank.
  • Being a BSBDA, this account cannot be opened if one has another savings or salary account in any other bank.

State Bank of India- Basic Savings Bank Deposit Account (BSBDA)

Account Name Account Balance Rate of Interest (% p.a.)
Basic Savings Bank Deposit Account Up to Rs.1 lakh 2.70%
  Above Rs. 1 Lakh 2.70%

Features of Basic Savings Bank Deposit Account

  • This account variant can be opened by any individual provided they have valid KYC documents.
  • No upper limit to maximum balance in the account.
  • Get a basic Rupay ATM-cum-debit card.
  • The withdrawals can be done using withdrawal form at branches or through ATMs.
  • The account is available at all branches of the State Bank of India.

Conclusion

Opening a savings account is one of the very first steps towards maintaining one’s finances. For those who haven’t had any bank account before, a zero-balance account can be beneficial as these are Basic Savings Bank Deposit Accounts. Also, when you’re opening a zero-balance savings account, you can be rest assured of no zero balance-related penalties. Before having your pick, analyze these accounts basis ATM withdrawals, debit card benefits, transaction charges and complimentary insurance among others. And you’ll be ready to kickstart your savings in no time.

Disclaimer

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. City Credit Management LLP is not liable for any decision arising out of the use of this information.

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