Every person wants to save his money for the future so that he could use that money to fulfil his purposes and dreams. Whether you are an employer or employee, banker or non-banker, an official or non-official, not having a bank account is unimaginable in today’s era. There are various types of bank accounts in India that allow people to save their hard money in banks. The money deposited in the banks is more secure than the money in your pockets. Because the banks give the interest on the money saved by you in the banks.
There are four different categories of banks are Public sector banks or nationalized banks, private banks, foreign banks and cooperative banks. All these categories of banks allow the citizen to open a bank account in India.
Different types of bank accounts give you the interest on your money. So if you want to open a bank account then there are various types of bank accounts in India to help you for saving your money. You can choose different kinds of bank accounts according to your purpose, frequency of transactions and location and save your money. In this article, 7 types of bank accounts are explained.
Types of Bank accounts
There are various types of bank accounts. Here, we will discuss the different types of bank accounts and their features which are commonly used by the Banks. You can use all types of bank accounts to save you money and earn interest on your savings. Here is the list of various types of bank accounts in India.
- Saving Account
- Current Account
- Salary Accounts
- Recurring Account
- Fixed Deposit Account
- Joint Account
- No Frill Accounts
- NRI accounts
The savings account is generally used to save money in the bank account. The person also earns an income from their savings in the savings account. In the saving accounts, the banks, therefore, impose certain restrictions and also offer a reasonable interest rate like the transaction you can make every month is capped. There are various types of saving account depending upon the need of the person. Like:
- Regular Savings Account
- Zero Balance account
- Women’s Savings Account
- Kids’ Savings Account
- Senior Citizens’ Savings Account
- Family Savings Account
- Salary Based Savings Account
The person has the option to pick any of the accounts according to the need. Different accounts have different benefits so you can choose according to your comfort and need.
The saving account is open to save money and take the interest on that money. It is a beneficial account where you can take a small interest. Let us take the example. Two brothers got the lottery of 2000. Each of them got 1000 rupees. Now, one brother use the money to buy new clothes and second deposited it in the saving account with the interest of 10%. After one year, he got 1100 rupees from the bank and first got nothing.
What is a saving account?
A saving account is the most basic type of bank account which can be open in any bank. A saving account allows, user, to deposit his money in the bank account so the person has no need to carry the money with him. The benefit of saving money in the bank is that the user will get specified interest on the money deposited in the account. Also, the person can withdraw his money anytime whenever he needs it with the help of an easy process.
Why do I need a savings account?
The saving account can be used to save money and receive the payment from others. You can pay the bills and make online investments with saving accounts.
Restrictions on Withdrawals from saving account
The saving accounts are subject to the reasonable restriction given by the RBI regarding the numbers and amount of withdrawals within a specific period. According to the rules, one is allowed 150 withdrawals over one year. The minimum amount of a Cheque is Rs 5. But hardly any bank enforces these laws. However, the bank can use these restrictions if the bank found that the account holder is misusing the account. Before 24/10/2011, the interest on saving accounts was set by the RBI; but after that, the RBI gave this power to the banks to set their interest on saving accounts with some restrictions.
Key points of saving account
- You can save the money
- Interest on the deposited amount
- Limits on the transactions
- Withdraw the money whenever you need
- Can pay online bills and invest the money
Features of Saving Account
- A chequebook facility is available
- Credit card/ debit card available
- The interest rate on deposited money
- Useful for online transaction
- SMS facility available
This type of account in bank is normally maintained by a business owners, traders and entrepreneurs who need to make transactions and receive payments more than others. Most of the current accounts are running in the name of companies or firms. These accounts are never used for savings or any type of investment. Normally a minimum balance is required to be always maintained therein. In these accounts, there are no limits on the number of transactions and the amount deposited by the transactions in a day. The account holder is free to withdraw the money at any time without giving the notice to the bank. The bank does not give any interest on these accounts through the bank charges certain services charges from these account holders.
Current accounts allow the owner to withdraw money more than what is currently available in that account. A current account holder has the option to deposit cash or cheques at different bank branches which is extremely good for the account holder to collect the payment from any customers.
What is current account in the bank?
An account that is used for the daily unlimited transitions is known as a current account. There is no interest rate on the current account and you need a higher minimum balance to main this account. The current account is normally used by business owners and traders who need to do daily transactions. Other types of accounts do not provide the facility of unlimited transactions.
Key points of current account
- No limit on transactions
- A minimum balance is required
- No limit on withdrawal
- Zero-interest on the money deposited in the current account
- Can withdraw money more than currently available money in the account
Features of Current account
- A monthly Cheque book facility is provided in current accounts without any charges.
- The account holder can deposit all types and drafts in the current account.
- The account holder can conduct their business transactions smoothly.
- There is no restriction on the number of transactions.
- The SMS facility is available to check the payment details, there is no need to visit the bank branch to check the transaction.
Difference between current account and savings account
There are five main differences between current account and saving account:
- A Saving account is a deposited account that allows only limited transactions whereas the current account has no limits on transactions.
- The saving account is suitable for the people who are salaried employees whereas, the current account is suitable for the person who needs daily transactions.
- The saving account has an interest rate on the deposited money whereas, there is zero interest on the current account.
- The current account allows its user to withdraw money more than the current account balance whereas the saving account does not allow its holder for the same.
- The minimum balance to maintain the saving account is very low whereas the minimum balance for the current balance is much higher than saving accounts
All these are the main difference between saving account and current account.
Salary accounts are used by the employers to the employee to credit salary of the employee. These types of bank accounts are open as per the tie-up between the bank and the employer of a company or industry. It is the more convenient way to credit the salary into the account of the employee. The salary account is not only useful for the employer but also gives some benefits to the employee. There is zero minimum balance required to maintain the salary account. The account holder can enjoy the interest on the money in the account where the interest rate will depend upon the types of bank accounts.
The salary account can be converted into a saving account if the salary has not been credited into the account for a period of three months. Then the minimum balance will be required to maintain the account. The saving account can also be converted into a salary account if the bank allows this and your employer has a tie-up with that bank.
What is salary account?
A salary account is a type of saving account in which the employer of the account holder pays the fixed amount of money every month as the salary of the employee.
Who can open the salary account?
A person can open a salary account whose employer has a relationship with the bank related to the salary.
Key points of salary account
- Account open by the employer with the tie-up with a bank
- The main purpose is to credit the salary of the employee
- Zero minimum balance is required to maintain the account
- The interest rate on the money deposited in the account
- Can convert the salary account into saving account and vis-versa according to the job
Benefits of salary account
The benefits of salary accounts vary from bank to bank. But there are some common benefits which are given to the salary account holder is:
- Zero minimum balance
- Free Cheque book
- Debit cards
- Phone banking
- Demat account services
- Loan convenient
- Credit card offers
- Interest on the money
- Conversion of account
Recurring Deposit Account
The Recurring deposit accounts are also known as RD Accounts. This account is helpful for persons who do not have a lump sum amount of money but wants to save a small amount of money every month. The recurring account is for a fixed tenure. The holder of the account put the fixed amount of money in this account by monthly or quarterly instalments. These accounts are best for future savings if any person wants to save the money for a child’s education, the marriage of a daughter, etc.
The person deposits a fixed amount of money every month in the account. The minimum amount is Rs 100 per month. If a person defaults in payment of the fixed money, a small penalty will be imposed. Some banks also allow the person to deposit a higher amount of instalments, with an upper limit as fixed for the same. The amount can be withdrawn on the fixed date of the month from the bank. If the person wants to withdraw the money before the expiry period, he can do that but have to face a penalty in the form of a lower interest rate.
What is a recurring deposit account?
The recurring deposit account is a fixed tenure account in which the person can save his money by depositing the money into instalments. The instalments can be monthly or quarterly. The range or tenure of the RD account is from 6 months to 10 years.
Key points of Recurring Deposit Account
- Helpful for the savings for a long period
- The good interest rate on the deposit
- Minimum monthly or quarter instalments
- Fixed tenure of withdrawal
- Can withdraw the money but the interest rate will vary
Benefits of Recurring deposit account
- Passbook is issued
- A person gets a good interest rate on the money
- The monthly instalment is very low
- The person can decide his time and instalment according to his comfort.
Fixed Deposit Account
Fixed Deposit Accounts are also known as FD Accounts. A particular sum of money is deposited in the bank for a specific period in the fixed deposit account. The person deposits the money one time and withdraws the money one time. The money once deposited in this account cannot be withdrawn before the expiry of the period set at the time of depositing the money. But in a case, if the person wants to withdraw the money before the expiry period, he can withdraw the same by giving some penalty.
The banks paid the High-interest rates on the FD Accounts though the interest varies from bank to bank. The time period for the Fixed Deposit Account is from 7 days to 10 years. Also, the interest rate on the fixed money deposited in the account will vary depending upon the time period of the FD chosen by you. Not all banks allow premature withdrawal, so check it before opening the FD account.
Key points of fixed deposit account
- The time period is 7 days to 10 years
- A good interest rate on the amount
- The person can decide the amount and time period of FD
- Some banks provide premature withdrawal with some penalty
Features of fixed deposit account
- Provide passbook
- Very good interest rate
- One time instalment
- One time withdrawal
- The person can decide the time and amount for the FD
The joint bank account is the account that is held by more than one person. The persons can be relatives or partners who have trust in each other such accounts are open with the free consent of the parties. Each individual who is in the joint account has the right to deposit and withdraw funds from the account. The joint account can be of any type of account. The Joint account can be for the short term or long term because such types of bank accounts are used to do different types of contracts. The persons can choose from all types of bank accounts in India according to the need. Most of the family joint accounts are saving accounts and business partners’ accounts are current accounts.
Key points of Joint accounts
- Open by more than one person
- The person can choose any type of bank account for a joint account
- There should be trust in each other
- An account can be open for long term or short term
- Both the parties have the right to deposit or withdraw the money
Benefits of Joint account
- The one person can withdraw the money if one is not present
- Passbook is provided
- The debit card is provided
- SMS service is available
- Internet banking is available
- The account can be used for trading or paying online bills.
No Frill Accounts
The accounts which do not have any minimum balance requirements are known as no-frill accounts. The salary account also comes under the No Frill Accounts. The central bank had introduced the No frill account in 2005 to provide all the basic facilities to the poor people. These accounts are also known as Basic Saving Bank Deposit Accounts.
Key points of No Frill Account
- Introduced in 2005
- It provides basic facilities
Benefits of No frill account
- Provides passbook
- The person can withdraw the money 4 times a month
- No limit on Deposit the money
- ATM facility available
- Some banks provide internet banking
- SMS banking is available
The banks provide the various types of bank accounts in India and features for the Indians and Indian-origin people living overseas. The NRI accounts are divided into three types of NRI accounts:
The NRO account is also known as a Non-resident ordinary account. NRO account is a rupee account. This account is used to convert the foreign currency into Indian rupees. The income earned in these accounts is taxable. The person can open an NRO account in any type of bank account such as Saving Account, current account, FD, RD according to need. The person can also open this account as a joint account.
What is an NRO account?
NRO account stands for Non-resident ordinary accounts. This account is used to convert the international currency into Indian rupees. The NRO account can be open as any type of bank accounts.
The NRE account is also known as a Non-resident external account. The Indian citizen who moved to a foreign country needs this account or can convert his account to NRE if his bank allows this. Any money deposited in this account is converted into INR with the current exchange rate. The interest earned on these accounts is not taxable in India.
FCNR Account is known as a foreign currency non-resident account. This type of bank account is different from the other two types of bank accounts in India as this account is maintained in foreign currency. This account is interest-bearing and this interest is exempted from the tax.
These are the main types of bank accounts in India. The person can choose different types of accounts in India to save money. The interest rate on the amount saved in the bank vary from type of bank account and bank to bank, so you should check the details of each type of bank account in order to invest your money in the bank accounts.