Bank accounts are a secure option for safeguarding and investing hard-earned money. Financial institutions offer diverse account options tailored to unique financial needs. They are pivotal for several reasons. Firstly, they ensure the safety of your funds. Secondly, they enable swift fund transfers for financial convenience. Banks also provide interest on savings, along with cost-effective services such as cards, cheques, and overdrafts. Moreover, bank accounts simplify loan access, offer high liquidity, and establish an officially recognized identity. Furthermore, they make financial transactions transparent and traceable through passbooks and statements, ensuring clarity and accountability in your financial interactions.
Different Types of Bank Accounts Available in 2023
Banks and other financial institutions provide various types of accounts to meet specific requirements of their customers. The types of accounts are:
- Savings Account
- Current Account
- Salary Account
- Pension Account
- NRE Savings Account
- NRO Savings Account
- NRE Current Account
- NRO Current Account
- Fixed Deposits
- Recurring Deposits
- NRE Fixed Deposit
- NRO Fixed Deposit
- FCNR Accounts
Savings Account
A savings account is a secure financial tool held with a bank. It allows individuals to deposit money and earn modest interest. Its appeal lies in its convenience, safety, dependability, and liquidity. Deposits have no restrictions, and funds can be withdrawn when needed. The account’s purpose is to provide a secure place to store money not intended for frequent use. Account holders earn interest at varying rates, paid periodically, from monthly to annually. Notably, savings accounts offer quick access to funds for immediate use.
Features and Benefits of Savings Account
Savings account is a simple investment tool with an array of interesting features and benefits
- Idle money deposited in a savings account will earn interest between 3% to 7%.
- Provides high liquidity. You can withdraw and deposit money easily without any restrictions.
- Easy funds transfer is possible through online options like net banking and mobile banking.
- No cap on the amount deposited to the account.
- A facility to link the savings account with a fixed deposit is available. Amounts over and above a threshold limit will be transferred to fixed deposits to earn more interest.
- Additional banking services like debit cards, cheque book facility, and overdraft facility will be provided.
- Cheques can be issued directly to the Savings Account.
- Account holders have to follow the minimum balance stipulation to avoid penalties.
Current Account
A Current Account is a bank account that does not earn interest. It is primarily designed to meet the requirements of businesses. Current Accounts offer higher transaction limits for both cash deposits and withdrawals, whether within or outside the city. These accounts are accessible to a wide range of entities, including individuals, sole proprietorships, partnership firms, private and public limited companies, HUFs/specified associations, Societies, Trusts, and more.
Features and Benefits of Current Account
Current accounts primarily serve as business accounts where frequent money transfers occur between financial accounts. They are ideally tailored for corporate entities and business proprietors to facilitate their day-to-day financial operations. The key features and benefits of current accounts are:
- The Current Account is non-interest-bearing.
- Allows higher cash deposits and withdrawals within or outside the city.
- Overdraft Facility is available based on business transactions, financial documents, and average balance.
- The minimum balance requirement varies by Current Account type.
- Extended banking hours for transactions.
- Debit Card available based on account packages.
- It Streamlines day-to-day business transactions and payments.
- Facilitates profit or loss assessment.
- Overdraft covers fund shortfalls.
- Enables digital fund transfers via online platforms like Netbanking and Mobile Banking.
Salary Account
Salary Accounts offer a convenient method for employers to disburse monthly salaries to their employees. This approach not only simplifies payroll for the employer but also provides various ‘Salary Account’ advantages to the employee. Essentially, a Salary Account is a form of Savings Account where the account holder’s employer deposits a fixed monthly salary amount.
Features and Benefits of Salary Accounts
The features and benefits of salary accounts may vary with the bank. However, some of the common features and benefits are:
- No minimum balance stipulation. It provides flexibility to account holders to manage finances without worrying about maintaining a minimum balance to avoid penalties.
- Provides the convenience of online fund transfers, allowing the transfer of funds globally. Avoids the need to issue cheques or withdraw cash. Some banks provide phone banking services for remote transaction management.
- Personalised cheque books and debit card facilities will be provided.
- Maintaining a salary account will provide easy access to various loan schemes including personal loans, vehicle loans, and home loans.
- Simplified documentation for loans. Competitive interest rates will be offered for loans.
- Will have access to investment options like mutual funds, government bonds, insurance products, etc., through their accounts.
- Demat accounts can be linked to salary accounts for stock investments and trading.
NRI Accounts
An NRI Account or Non-Resident Indian Account can be opened by NRIs, PIOs, or OCIs with RBI-authorised banks or financial institutions, enabling various banking services. NRIs utilise these accounts to deposit income originating from India or abroad, including earnings from employment or investments. Three NRI Account types exist. It is crucial to be aware of the service features offered by Indian banks under these accounts to meet specific goals, such as investing, remitting funds to resident dependents, or fulfilling financial obligations.
Features and Benefits
NRI accounts are of 3 types. NRE, NRO and FCNR accounts. The options under NRE accounts are NRE Savings Account, NRE Current Account and NRE Fixed Deposit Account. The options under NRO accounts are NRO Savings Account, NRO Current Account and NRO Fixed Deposit Account. The salient features and benefits of NRI accounts are:
- NRIs can send income to dependents in India, such as monthly remittances from abroad, deposited in an NRO Savings Account, which is denominated in Indian Rupees.
- NRIs can continue to earn income from assets in India, like rental income, deposited in an NRO account.
- NRIs can invest in Indian avenues (equity, mutual funds, etc.) through the NRI account, facilitated by the Portfolio Investment Scheme (PIS).
- Funds deposited in an FCNR-B account need not be converted into INR, mitigating currency rate risks.
- NRI accounts offer competitive interest rates.
- Interest income from NRE and FCNR (B) accounts is tax-free under the Income Tax Act 1961.
- NRI account holders can obtain loans in India, using their account balance as security, including various fund-based and non-fund-based facilities.
FCNR Account
FCNR (Foreign Currency Non-Resident) Accounts enable NRIs to maintain Fixed Deposit Accounts in foreign currencies like USD, GBP, EUR, JPY, AUD, and CAD, investing earnings from abroad in India.
Features and Benefits
Some of the features and benefits that compel investment of income earned abroad either through employment or investment are given below:
- FCNR Accounts are Term Deposits, not Savings Accounts, with premature withdrawal allowed after one year.
- Opening an FCNR Account is possible by transferring funds from an existing Non-Resident External (NRE) Account.
- Interest earned on FCNR deposits is tax-free in India.
- Both the principal and interest in FCNR deposits are fully repatriable, permitting complete transferability.
- Overdraft facilities are available on FCNR Term Deposit Accounts.
- FCNR Accounts offer an excellent option for saving money in foreign currencies, making them a wise choice for NRIs.
FD Account
An FD or fixed deposit, a popular investment in India, involves locking a sum of money for a chosen period, typically from days to years. The rate of interest earned on Fixed Deposits is higher than the interest earned on Savings Accounts. The rates, however, differ from bank to bank.
Features and Benefits
The features and benefits of fixed deposits are:
- Investment tenures vary from 7 days to 10 years, depending on the bank.
- Returns are compounded periodically, such as quarterly, annually, or monthly.
- Senior citizens enjoy a 0.5% higher interest rate than regular investors.
- Premature and partial withdrawals are usually allowed with associated penalties.
- Upon maturity, one can reinvest the principal and interest.
- Guaranteed returns in the form of fixed interest rate applied on the investment
- Tax is deducted only when interest crosses the specified limit as per income tax regulations.
- Tenure flexibility, allows deposit holders to decide the duration.
- Convenient liquidation is often available online through net banking.
- Easy access to loans, with potential for up to 95% of the FD amount, making it a reliable investment.
RD Account
Recurring Deposits, commonly referred to as RDs, are a popular and trusted investment approach preferred by individuals across all age groups. But what exactly is a Recurring Deposit account? RDs are specialised term deposits offered by Indian banks, facilitating systematic saving and delivering rewarding returns. In India, numerous banks and NBFCs offer RD accounts with tenures ranging from six months to a decade.
Features and Benefits
Recurring Deposits offer a constant interest rate until maturity, with the principal and accrued interest returned at the end of the term. The key features of Recurring Deposits are
- RDs provide guaranteed returns with fixed interest rates throughout the investment.
- Starting with just Rs. 100, RDs are accessible to investors with limited funds.
- RDs allow terms from as short as six months to as long as ten years, offering flexibility.
- Recurring Deposits typically offer higher interest rates compared to regular savings accounts, compounded quarterly.
- RDs have lock-in periods ranging from 30 to 90 days, where withdrawals do not earn interest.
- Early withdrawals are permitted, subject to applicable penalties.
- RDs can be used as collateral for loans or overdrafts, offsetting default costs with funds from the RD account.
Importance of Bank Accounts
A bank account is essential for financial stability, regardless of your life stage. The following points suggest the importance of bank accounts
- Access funds conveniently through ATMs, mobile apps, and websites, reducing the need to carry cash.
- Speedy access to government scheme funds via Direct Benefit Transfer (DBT) if your account is linked to an Aadhaar or PAN card.
- Bank transactions provide clear records, aiding budgeting and expense tracking.
- Automate transactions, such as bill payments, for greater convenience and timeliness.
- Store money safely, insured against bank robbery.
- A well-managed bank account can improve the chances of procuring loans with better terms.
- Savings accounts often offer interest, while easy fund transfer enables investment in various options for potential growth.
How to Open Different Bank Accounts Online in India?
You can open different bank accounts online through the website of the preferred Bank. The steps for opening bank accounts are given below:
- Access the official website of the bank
- Choose the desired product from the ‘Products’ option on the homepage
- A relevant account opening form will open when you tap on ‘Apply Now’ option which you will have to complete.
- Click on the proceed button after completion.
- Upload soft copies of valid address and identity proof documents.
- Some banks may ask for e-signature while some may require you to visit the bank.
- Transfer the initial amount required to open an account
- Once the application is approved, you will receive the account details and the net banking login details via email
How to Open Different Bank Accounts Offline in India?
To open different bank accounts offline
- Visit the nearest branch of the preferred bank
- Obtain the application pertaining to the type of account chosen
- Complete the application by filling in the relevant details
- Submit the application along with self-attested copies of relevant documents to the designated counter
- The application and documents will be verified by the bank official
- Deposit an initial deposit as specified by the bank
- Thereafter, the account will be opened and account details along with a passbook and debit card will be provided.
Types of Bank Accounts FAQ’s:-
The initial deposit specification depends on the type of account chosen.
The account will be opened within 24 hours generally.
Yes. Savings accounts can be opened for minors. But the account will be operated by the guardian till the minor attains majority.
The maximum term for a fixed deposit is 10 years.
The minimum deposit for recurring deposits is Rs. 100