Types of Bank Accounts

Banks offer various types of accounts to meet the diverse needs of their customers. These accounts can be broadly categorized into:

• Savings Accounts
• Recurring Deposit Accounts
• Current Accounts
• Fixed Deposit Accounts
• NRI Accounts
• DEMAT Accounts
• Senior Citizens’ Accounts
• Salary Accounts

1. Savings Bank Account

A savings account is a type of bank account that allows individuals or joint account holders to save money. The main advantage of a savings bank account is that it pays interest on the deposited amount.

Features of Savings Bank Account:

• No limit on the number of deposits, but restrictions on withdrawals.
• Interest rate varies from 4% to 6% per annum.
• No minimum balance requirement.
• Internet banking service is provided.
• ATM/Debit/Rupay Card is provided to account holders.
• Further categorized into Basic Savings Bank Deposit (BSBDA) and Basic Savings Bank Deposit Accounts Small (BSBDS).
• Suitable for students, working professionals, housewives, pensioners, etc.

2. Current Account

A current account is a type of bank account that is not used for savings but rather for business transactions. It is commonly opened by businessmen who have frequent transactions with the bank.

Features of Current Account:

• Opened by businessmen, associations, companies, institutions, religious institutions, etc.
• No restrictions on the number of deposits or withdrawals.
• Internet banking feature is available.
• No fixed maturity.
• Overdraft facility is provided.
• No interest is paid on current bank accounts.

3. Fixed Deposit Account

A fixed deposit account (FD) is a type of bank account that offers a higher interest rate than a regular savings account. It requires a separate account and has a fixed maturity date.

Features of Fixed Deposit Account:

• Higher interest rate compared to savings account.
• Interest is paid on the maturity date.
• May require a separate account.
• Fixed maturity period.
• Premature withdrawal may result in penalties.
• Suitable for individuals seeking higher returns on their savings.

Fixed Deposit Account

• A one-time deposit and take away account.
• Account holder deposits a fixed amount for a fixed period.
• Withdrawals only allowed once, not anytime as per the account holder’s requirements.
• Interest is paid on the fixed deposit account.
• Interest rate depends on the amount deposited and the time duration.
• Bank is liable to repay the full amount before maturity.

Recurring Deposit Account

• Account holder deposits a fixed amount every month till maturity.
• Encourages regular deposits and provides decent returns.

Features of Recurring Deposit Account

• Regular deposit factor and interest provide flexibility and ease of investment.
• Can be opened by individuals or institutions, jointly or separately.
• Regular monthly installments can range from INR 50 to any amount.
• Account tenure ranges from 6 to 120 months.
• Interest rate varies from bank to bank.
• Nomination facility is available.
• Passbooks issued for regular account summary.
• Penalty for premature withdrawal.

DEMAT Account

• DEMAT (Dematerialization) Account holds shares and securities in electronic form.
• Maintained by National Securities Depository Limited and Central Depository Services Limited.

Features of DEMAT Account

• Facilitates easy trade of shares and securities.
• Stress-free transaction of shares.
• Requires KYC procedure for opening.
• Reduced transaction cost.
• Traders can work from any location.
• Less paperwork for securities transfer.

NRI Account

• Non-Resident Indian (NRI) account for Indian citizens living abroad.
• Offers various banking services to NRIs.

Features of NRI Account

• Different types of NRI accounts: NRE, NRO, FCNR, and RFC.
• NRE account for earning income from foreign sources.
• NRO account for income earned in India.
• FCNR account for foreign currency deposits.
• RFC account for repatriable foreign currency deposits.
• Tax benefits and repatriation facilities.
• Easy access to banking services in India.

Types of NRI Accounts:

• Non Resident Ordinary Rupees (NRO) Account: Allows easy transfer of foreign earnings to India. Can be opened as a savings, current, FD, or RD account. Can be opened by an individual or a group of persons.
• Non Resident External Rupees (NRE) Account: Created when an Indian citizen moves abroad for employment. Existing bank accounts are converted into NREs. Can be jointly opened with an Indian resident.
• Foreign Currency Non Resident (FCNR) Account: Allows management of an international currency. Only available as a term deposit and can be withdrawn after maturity.

Senior Citizens’ Account

Individuals above 60 years of age are considered senior citizens as per government directives. Senior Citizens’ accounts are regular savings accounts with an additional interest benefit ranging from 0.25% to 0.50% p.a., determined by the respective banks.

• Senior Citizens’ accounts are opened as joint accounts, with the first name being that of the senior citizen to avail the benefits.
• Applicable only to senior citizens who are residents of India.

Salary Account

A salary account is designed to facilitate the smooth transfer of monthly salaries from employers to employees. It offers a convenient financial environment for both parties.

Features of Salary Account:

• Primary feature is the direct credit of monthly salaries by employers.
• Generally have low or no minimum balance requirements.

Benefits of Salary Account:

• Minimal or no fees for account maintenance, transactions, and ATM withdrawals, allowing employees to save on banking costs.
• Access to financial products and services offered by the bank, such as personal loans, credit cards, or investment options.

Bank Accounts: Importance and Types

Bank accounts serve as essential financial management tools for individuals, businesses, and institutions. Here are some key reasons why opening a bank account is crucial:

• Simplified Transactions: Account holders can conveniently withdraw money and make payments through their respective accounts, ensuring ease and efficiency in financial transactions.

• Secure Savings: Bank accounts provide a secure repository for hard-earned money. Even in the unfortunate event of a bank closure, account holders are entitled to get their money back.

• Cost-Effective Services: Many banking organizations offer free or low-cost services to account holders, making banking accessible and affordable.

• Interest-Earning Potential: Most banks offer interest rates on savings accounts, allowing account holders to grow their money over time.

• Easy Access to Credit: Having a bank account can be advantageous when seeking credit, as banks often provide easier access to loans and other financial products to their customers.

Banking and finance aspirants should thoroughly understand the various types of bank accounts, as they form an important part of Banking Awareness topics.

Types of Bank Accounts

1. Savings Account: This is the most common type of bank account, designed for everyday transactions and savings. It offers basic banking services and typically provides a modest interest rate on deposited funds.

2. Recurring Deposit Account (RD): An RD account encourages regular savings by allowing account holders to deposit a fixed amount at regular intervals, usually monthly. It offers a higher interest rate compared to a regular savings account.

3. Current Account: Primarily used by businesses and individuals with high transaction volumes, a current account facilitates frequent deposits and withdrawals without any restrictions. However, it typically does not offer interest on deposited funds.

4. Fixed Deposit Account (FD): An FD account involves depositing a lump sum amount for a fixed tenure, ranging from a few months to several years. It offers a higher interest rate compared to savings accounts and RD accounts.

5. DEMAT Account: A DEMAT (Dematerialized) account is used to hold securities such as stocks, bonds, and mutual funds in electronic form. It simplifies the process of buying, selling, and transferring securities.

6. NRI Account: Non-Resident Indian (NRI) accounts are designed for Indian citizens who reside outside of India. These accounts enable NRIs to manage their finances in India conveniently.