Bank accounts assist you in keeping your money secure. At the same time, they help you grow your investment or savings by giving you interest on your deposits. India has four types of banks: private banks, public sector banks (also called “nationalised” banks), foreign banks, and cooperative banks. In India, you can open a bank account at any of these four types of banks.
To know how to choose a bank account that fits your needs, you need to know what types of bank accounts each of the four types of banks offer. This article will help you learn about the most common types of bank accounts in India.
Types of Bank Accounts
Bank accounts are classified into several types. In this article, we will go over the various types of bank accounts and the features that are commonly used by banks. You can save money and earn interest on your savings by using any type of bank account. Here is a list of the various types of bank accounts available in India.
- Savings Account
- Current Account
- Fixed Deposit Account
- NRI Account
- Recurring Deposit Account
- DEMAT Account
- Salary Account
Importance of Bank Accounts
To manage the finances of people, organisations, businesses, and so forth, bank accounts are opened. The following are the reasons why a bank account should be opened:
- Transactions are simple because account holders can easily withdraw money and make payments from their accounts.
- Bank accounts provide a haven for your hard-earned money. Even if the bank fails, account holders receive their money back.
- Most banks provide free or low-cost services to account holders.
- It is a simple and reasonable way to grow your money. Almost every bank provides an interest rate at which account holders can earn interest if they deposit funds in a savings bank account.
- Bank accounts provide quick access to credit. Having a bank account is advantageous because banks provide easy credit access to their customers for all types of loans.
Savings accounts, as the name implies, can be opened by an individual or jointly by two people to save money. The main advantage of opening a savings bank account is that the bank will pay you interest for doing so.
Some of the features of a Savings account are as follows:
- There is no limit to how many times an account holder can deposit money into this account, but there is a limit to how many times money can be withdrawn from this account.
- The annual interest rate that an account holder receives ranges from 4% to 6%.
- There is no requirement to keep a minimum balance in this type of account.
- Owners of savings accounts have the option of obtaining an ATM, debit, or RUpay card.
- Savings bank accounts are further classified as Basic Savings Bank Deposit Accounts (BSBDA) and Basic Savings Bank Deposit Accounts Small Scheme (BSBDS).
- Savings accounts are most beneficial for students, pensioners, and working professionals.
Current bank accounts are the second type of banking account. It is not intended for these accounts to be used for savings.
Following are some key ideas regarding the current bank account:
- This type of bank account is most likely to be opened by businessmen. Associations, institutions, companies, religious institutions, and other businesses can open current accounts.
- The amount of money that can be deposited or withdrawn from such accounts is not limited.
- Internet banking is offered.
- This type of bank account has no set maturity date.
- Current bank accounts can have an overdraft facility.
- Interest is not paid on these accounts.
Fixed Deposit Account
Another type of bank account is the fixed deposit account, which can be opened at any bank in the public or private sector.
The following is a list of important things to know about fixed deposit accounts:
- It is a one-time deposit and withdrawal account. The account holder is required to deposit a fixed amount of money (as desired) for a set period.
- The money deposited in an FD account can only be withdrawn in one lump sum, not in installments.
- Banks offer interest on fixed deposit accounts.
- The interest rate is determined by the amount you deposit and the term of the FD.
- The entire amount is repayable before the FD’s maturity date.
To satisfy the banking needs of a Non-Resident Indian or a Person of India Origin, NRI accounts are available.
NRI Accounts are further divided into three categories:
- NRO (Non-Resident Ordinary Rupees) Account – This account will allow you to easily transfer your foreign earnings to India. It can be opened as an FD/RD/Current/Savings account. These accounts can be opened individually or jointly.
- Non-Resident External Rupees (NRE) Account – When an Indian citizen relocates to another country to work, his or her account must be converted into an NRE account. This account can be opened in collaboration with an Indian resident.
- FCNR (Foreign Currency Non-Resident) Account – This type of account can be used to manage foreign currency. It can only be withdrawn after the maturity period if it is in the form of a term deposit.
Recurring Deposit Account
Recurring Deposit Accounts, also known as RD Accounts, are a type of account where the account holder must deposit a set amount regularly until the account reaches the predetermined maturity date.
The following are the features of the Recurring deposit account:
- A recurring deposit account can be opened by either an individual or an institution, either separately or jointly.
- Periodic or monthly instalments may be as low as Rs.50/- or may vary from bank to bank.
- The number of months for which an RD account can be opened ranges from 6 to 120.
- The interest rate varies depending on the bank with which you open an account.
- Nomination is also possible for RC accounts.
- For this type of bank account, a passbook is issued.
- Premature withdrawal of funds is permitted, provided that a sum of money is deducted as a penalty.
Such accounts facilitate the trading of stocks and securities.
- They make it possible to conduct a stress-free share transaction.
- The KYC procedure is required for the opening of a DEMAT account.
- Transaction costs are reduced.
- Traders can work from anywhere.
- Securities transfers can be completed with less paperwork.
According to the agreement between your employer and bank, you must open a salary account. Your employer puts your pay in the account every month. The salary account has the following features:
- Deposits in salary accounts earn interest, which varies by bank.
- There are no minimum balance requirements for salary accounts.
- The banks are the ones who issue the debit and credit cards.
- There are also lower rates for IMPS, NEFT, and RTGS transactions.
- Customers can also check their account balances online or via mobile banking.
- A few banks also provide overdraft services.
- Bill payment is made easier.
- Additionally, salary account holders pay less interest on personal and housing loans.
Banking in India is tailor-made by the public and private sectors to meet a variety of needs for different age groups and genders to equip all citizens with financial capabilities. As the country takes small but bold steps towards financial inclusion, citizens’ awareness and knowledge will go a long way towards empowering the nation’s collective efforts to grow together.
1. What are the various Types of bank accounts?
Ans: Bank accounts can be divided into several categories, including savings accounts, current accounts, recurring deposit accounts, fixed deposit accounts, salary accounts, DEMAT accounts, and NRI accounts.
2. What does DEMAT stand for?
Ans: DEMAT is an abbreviation for Dematerialized Account.
3. How many different kinds of NRI accounts are there?
Ans: NRI Bank Accounts are further classified as NRO (Non-Resident Ordinary Rupees) Account, NRE (Non-Resident External Rupees) Accounts, and FCNR (Foreign Currency Non-Resident) Accounts.
4. What are the best Types of Bank Accounts for everyday transactions?
Ans: Current accounts are ideal for day-to-day transactions because there is no limit to the number of times money can be deposited or withdrawn from such accounts. These accounts are mostly opened by businessmen and are not for saving.