Types of Bank Accounts – A bank account is a financial account maintained by a bank or other financial institution in which the financial transactions between the bank and a customer are recorded.
- Banks offer various types of accounts.
- Common examples include Savings, Current, Salary, and BSDA Accounts.
- You can also open Fixed, Recurring Deposit and DEMAT Account.
- Banks provide several facilities with almost all accounts, e.g., net banking, debit cards, etc.
- You can also download banking apps to access your accounts.
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Different types of bank accounts serve different needs. It’s wise to put money into the best account type for your financial goals so you get access to the right tools for spending and saving. Doing so allows you to maximize the return from your bank, minimize fees, and manage your money conveniently.
Types of Bank Accounts:
Various Types of Bank Accounts:
- Saving Account
- Basic Savings Bank Deposit Account (BSBDA)
- Current Account
- Salary Account
- Recurring Deposit Account
- Fixed Deposit Account
- DEMAT Account
- NRI Accounts
Saving Account:
A savings account is an account provided by a bank for individuals to save money and earn interest on the cash held in the account. A savings account can be used to save money for specific expenses or for longer-term undefined goals, all while earning interest on the money in the account.
The ‘saving account’ is generally opened in bank by salaried persons or by the persons who have a fixed regular income. This facility is also given to students, senior citizens, pensioners, and so on.
Commercial banks (like ICICI, HDFC, etc.), co-operative banks (like Saraswat, Cosmos, etc.), public sector banks (like State bank of India, Bank of India, etc.) and postal departments accept deposits by way of opening saving bank account with them.
Saving accounts are opened to encourage the people to save money and collect their savings.
In India, saving account can be opened by depositing र100 (approx. US $2) to र5000 (approx. US $100). The saving account holder is allowed to withdraw money from the account as and when required. The interest which is given on saving accounts is sometime attractive, but often nominal.
At present, the rate of interest ranges between 4% to 6% per annum in India. The interest rates vary as per the amount of money deposited (lying) in the saving bank account, scheme opted, and its maturity range. It is also subject to current trend of banking policies in a country.
Basic Savings Bank Deposit Account (BSBDA):
BSBDA is a type of savings account that does not require a minimum balance. That said, it comes with certain restrictions. For example, the maximum balance in the account should not be more than INR 50,000 at any time; or the total value of transactions should not exceed ten thousand rupees in a month. In doing so, the account ceases to be a BSBDA and will be converted to a regular savings account.
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Current Account:
The second type of bank account is the current bank account. These accounts are not used for the purpose of savings.
Some important pointers related to the current bank account have been discussed below:
- This type of bank account is mostly opened by businessmen. Associations, Institutions, Companies, Religious Institutions and other business-related works, the current account can be opened
- There is no fixed number of times that money can either be deposited or withdrawn from such accounts
- Internet banking is available
- This type of bank account does not have any fixed maturity
- Overdraft facility is available for current bank accounts
- There is no interest that is paid on such accounts
Salary Account:
As the name suggests, a salary account is where your employer credits your monthly salary. These accounts are opened by employers who typically tie-up with one bank and open accounts for all their employees. Salary accounts double as zero balance accounts since you can withdraw all the sums deposited in the account.
Recurring Deposit Account:
- Any resident individual- single accounts, two or more individuals in joint accounts, Associations, clubs, Institutions/Agencies specifically permitted by the RBI etc., are eligible to open this account in single/joint names.
- Periodic/Monthly instalments can be for any amount starting from as low as Rs.50/- onwards.
- An account can be opened for any period ranging from 6 months to 120 months, in multiple of 1 month.
- The amount selected for installment at the start of the scheme will be payable every month.
- The number of instalments once fixed, cannot be altered.
- Approved rate of interest is compounded every quarter.
- The amount after maturity will be paid to customers one month after the deposit of the last installment.
- Passbook will be given to the depositor.
- TDS will be applicable on the interest, as per the latest changes in the Income Tax Act on cumulative deposits also.
Fixed Deposit Account:
Fixed Deposit Account A particular sum of money is deposited in a fixed deposit account for a given duration. If a deposit is taken out before the maturity date, penalties will be imposed. Fixed deposits enjoy higher interest rates. The interest rate is subjected to variation from bank to bank and also periodic revisions.
- The account which is opened for a particular fixed period (time) by depositing particular amount (money) is known as Fixed (Term) Deposit Account.
- The term ‘fixed deposit’ means that the deposit is fixed and is repayable only after a specific period is over.
- Under fixed deposit account, money is deposited for a fixed period say six months, one year, five years or even ten years. The money deposited in this account can not be withdrawn before the expiry of period.
- The rate of interest paid for fixed deposit vary (changes) according to amount, period and from bank to bank.
DEMAT Account:
Shares and securities which can be held in electronic format constitute the DEMAT account. The DEMAT account also stands for Dematerialized Account.
Given below the points that need to be known by a candidate regarding the DEMAT Account:
- There are only two depository organisations which manage this type of bank account in India. This includes: National Securities Depository Limited and Central Depository Services Limited
- This helps facilitate easy trade of bonds and shares
- Helps in conducting stress-free transaction of shares
- KYC is required for opening the DEMAT Account
- Transaction cost is reduced
- Traders can work from anywhere
- The transfer of securities can be done with reduced paperwork
NRI Accounts:
There are different types of bank accounts for Indians or Indian-origin people living overseas. These accounts are called overseas accounts. They include two types of savings accounts and fixed deposits — NRO or non-resident ordinary and NRE or non-resident external accounts. Banks also offer foreign currency non-resident fixed deposit accounts. Let us quickly see the various types of bank accounts for NRIs-
a) Non-resident ordinary (NRO) savings accounts or fixed deposit accounts
NRO accounts are rupee accounts. When NRIs deposit money in these accounts, usually in foreign currency, it is converted into INR at the prevailing exchange rate. NRIs can park money earned in India or overseas in NRO bank accounts. Payments like rent, maturities, pension, among others, can be sent abroad through NRO accounts. The income earned on these deposit accounts is taxed.
b) Non-resident external (NRE) savings accounts or fixed deposit accounts
NRE deposit accounts are similar to NRO accounts and the funds in these accounts are maintained in INR. Any money deposited into these accounts is converted into INR at prevailing exchange rates. But, these accounts are only for parking your earnings from abroad. The funds, both principal and interest, are transferable. But, the interest earned on these deposit accounts is not taxed in India.
C) Foreign currency non-resident (FCNR) account
As the name suggests and unlike the other two types of bank accounts, FCNR accounts are maintained in foreign currency. The principal and interest from these accounts are transferable, but the interest earned is not taxed in India.
Specifics | FCNR | NRE | NRO |
---|---|---|---|
Account opening | NRIs/PIOs/OCIs(Individuals/entities of Bangladesh/Pakistan require prior approval of RBI | NRIs/PIOs/OCIs(Individuals/entities of Bangladesh/Pakistan require prior approval of RBI | Any Individual resident outside India |
Joint Account | In the names of two or more non-resident individuals. With a local close relative on ‘former or survivor basis’ | In the names of two or more non-resident individuals. With a local close relative on ‘former or survivor basis’ | In the names of two or more non-resident individuals. With a local close relative on ‘former or survivor basis’ |
Money in which account is denominated | US dollar, pound sterling, Yen, Euro, Australian dollar & Canadian dollar | Indian Rupees | Indian Rupees |
Nomination | Allowable | Allowable | Allowable |
Account Type | Term Deposit only | Savings, Current, Fixed, Recurring deposit | Savings, Current, Fixed, Recurring deposit |
Interest Rate | Banks are allowed to determine interest rates for Deposits | Banks are allowed to determine interest rates for Deposits | Banks are allowed to determine interest rates for Deposits |
Fixed deposits-period | not less than 1 year and not more than 5 years | Min- 1year Max- 10years | As applicable to resident accounts |
Income Tax | Not Taxable | Not Taxable | TDS on Interest received on NRO deposits to be deducted at 30.90% |
Repatriability | Repatriable | Repatriable | Not Repatriable |
Loans in India 1)To account holder 2)To third parties | Without any financial ceiling on the loan amount subject to standard margin requirements | Without any financial ceiling on the loan amount subject to standard margin requirements | 1)Permitted 2)Permitted |
Loans in Abroad 1)To account holder 2)To third parties | 1) Without any financial ceiling on the loan amount subject to standard margin requirements 2)Not Permitted | Without any financial ceiling on the loan amount subject to standard margin requirements | 1)Not permitted 2)Not permitted |
Foreign Currency loans India 1)To Account holder 2)To third parties | 1) Permitted 2) Not permitted | 1) Not permitted 2) Not permitted | 1) Not permitted 2) Not permitted |
Frequently Asked Questions About “National Highways In India”:
What is a Bank?
A bank, in its elementary form, is a financial institution that has been provided with due regulatory approval for extending loans and receiving deposits from its customers.
What are the different types of bank accounts?
The different types of bank accounts are – Savings Account, Current Account, Recurring Deposit Account, Fixed Deposit Account, DEMAT Account, NRI Account.
How many types of NRI accounts are there?
NRI Bank Accounts are further classified into three types – NRO ( Non-Resident Ordinary Rupees) Account, NRE ( Non-Resident External Rupees) Account, and FCNR ( Foreign Currency Non-Resident ) Account.
Who can open a current account?
This type of bank account is mostly opened by businessmen. Associations, Institutions, Companies, Religious Institutions and other business-related works, the current account can be opened.
What is the full form of DEMAT account?
The DEMAT account also stands for Dematerialized Account.
What is the full form of BSBDA?
Basic Savings Bank Deposit Account
What is a DEMAT Account?
Shares and securities which can be held in electronic format constitute the DEMAT account. There are only two depository organisations which manage this type of bank account in India. This includes: National Securities Depository Limited and Central Depository Services Limited