Salary Account

From zero to 5k in 3 months

Zero balance salary accounts could lose their status on job switches. Also, they will be liable to pay penalties like a normal savings account on non-credit of three salaries, finds Atmadip Ray
HAVE you switched jobs recently or are you on your way out from one? If you say yes to either of these questions, then you would need to check out a few details on your bank account. This is especially true if your bank account happens to be a salary account. Salary accounts are typically zerobalance accounts with numerous freebies. For salary account holders, banks offer facilities like free-of-cost phone banking or internet banking, free demand drafts and even preferential interest rates on personal loans. Account holders also receive instant credit of salaries. The most striking benefit is, perhaps, the maintenance of zero balance. Many account holders, however, often tend to overlook the fact that they are not entitled to get these benefits attached with salary accounts once they leave their present jobs. WHAT HAPPENS THEN? Explains ICICI Bank's head of retail liabilities Maninder Singh Juneja: “If salaries don’t get credited for three consecutive months in any salary account, then the particular account gets converted into a normal savings account. This means, the customer needs to maintain Rs 5,000 quarterly average balance instead of keeping zero balance.” In most cases, banks set the QAB (quarterly average balance) at Rs 5,000. However, there is no uniform rule on QAB. It varies from bank to bank. Axis Bank’s eastern operation head Kakali Majumdar says: “We have introduced a system which detects non-payment of salaries for three months and converts these accounts into normal savings bank accounts. Then, customers are treated as per savings bank account norms and are liable to pay fines for non-maintenance of QAB.” WHAT SHOULD YOU DO? So, if you happen to be one of those who quit jobs recently, you would first need to know the QAB and quickly check the available balance on your salary account. If your account balance is more than the required amount, you would need to keep this for adhering to the QAB norm. Otherwise, you may be fined heavily. Or, you may follow what Nilkamal Sen, Anirban Dasgupta and Susenjit Chanda have done. These three enterprising Kolkata-based IT professionals quit their respective jobs recently and set up their own graphic designing firm. “I withdrew all the money from the salary account soon after I received the last salary from my previous employer. I don’t know what happened to the account after that,” Mr Sen told ET. This is certainly one of the ways of avoiding the possibility of being fined. Mr Dasgupta has chosen the other way: to keep the minimum balance and continue as a normal savings bank account holder. “When you are into an relationship, you tend to get some added facilities. So, I’ve decided to continue the relationship with the bank.” Mr Susenjit Chanda turned to be a tad smarter. “I know that for three months, the bank will entertain my account as salary account. After the three-month period, I will decide on what to do with the account.” EXCEPTIONS DO HAPPEN... Although banks maintain that the conversion of a salary account into normal savings bank account is “automatic” in case salaries are not being credited for three consecutive months, ET found numerous exceptions. In one particular case, the account was being treated as salary account even after four years of non-payment of salary! “This particular one is an internal lapse,” says the concerned banker, cautioning: “Any day the account would become a normal savings one. So, the account holder needs to be alerted.” ICICI Bank’s Mr Juneja tells ET: “We follow a very transparent policy. We inform our customers once there is a conversion of such accounts.” Most bankers, however, feel that customers should also inform the bank in case of a job switch. THE BEST STRATEGY It would be prudent to not go by exceptions. You may opt to close your salary account once you out of a particular job. Or else, you may decide to maintain the QAB. Whatever you do, take your decision well within three months and avoid paying hefty fines.

The Economic Times, Mumbai 2nd Feb 2008