July 13 (Bloomberg) -- Mexico's central bank will require lenders to offer free accounts to low- and middle-income consumers to reduce service fees, which authorities say are keeping many Mexicans out of the financial system.

Under new regulations to be published July 16, commercial banks will have 180 days to offer accounts that don't charge fees for automated-teller machine withdrawals, balance inquiries, debit cards and maintenance, the central bank said today on its Web site.

The requirement will make it easier for millions of Mexicans to open a bank account for the first time while forcing lenders to become more efficient, said Pascual O'Dogherty, head of financial system research at Mexico's central bank.

``Many people don't open an account because they're afraid of the fees,'' he said in an interview from Mexico City.

Mexico is stepping up efforts to increase competition in an industry where six banks control almost 90 percent of banking assets. Most of the country's population of 105 million have no access to financial services. The government last year gave Wal- Mart Stores Inc.'s local unit, Wal-Mart de Mexico SAB, a commercial-banking license just as a similar request was denied by U.S. regulators.

Central Bank Governor Guillermo Ortiz, for his part, has made competition a priority since winning a second term in 2003. Ortiz has since required the banks to cut credit- and debit-card fees by $200 million annually and disclose all levies built into loans, among other measures.

Biggest Banks

The biggest banks in Mexico are units of Bilbao, Spain- based Banco Bilbao Vizcaya Argentaria SA, New York-based Citigroup Inc. and Banco Santander SA. HSBC Holdings Plc's unit is the fourth largest. Enrique Castillo, president of the Association of Mexican Banks, wasn't available today to comment on the new regulations, according to his office in Mexico City.

The new rules apply to any account where individuals deposit as much as 165 times the daily minimum wage per month -- about 8,000 pesos ($743) -- and to any payroll account, O'Dogherty said. Such threshold covers most of Mexico's population, he said. The central bank doesn't have an estimate for how many accounts would benefit or how many people may enter the banking system for the first time, he said.

Just a fifth of Mexico's 25.8 million households use financial services, according to a 2004 survey by the government's statistics agency, the latest available.

To contact the reporter on this story: Adriana Arai in Mexico City at at aarai1@bloomberg.net

Last Updated: July 13, 2007 21:58 EDT