The current topic is very important for as generally many questions are asked in bank exams and interview on bank accounts like what are different types of accounts in the bank , what is the difference between a current account and saving the account.So understanding this topic is very important.
Types Of Bank Accounts
- Saving Account
- Current Account
- Recurring Deposit Account
- Fixed Deposit Account
- DEMAT Account
- NRI Accounts
Saving Bank Accounts: They are the most common accounts in banks. They can be opened by any customer, and yield a minimum rate of interest from the bank. For opening a saving bank account the basic necessity is you Aadhaar Card/ Voter ID/ Driving license/ Passport/ Pan Card.
There are different categories of Saving bank accounts from Banks to banks which yield different interest and provide different facilities as per their category. The famous Jan Dhan Accounts are an example of saving bank accounts.
a) Basic Savings Bank Deposit Accounts (BSBDA)
- This account will be considered as normal banking service.
- For this account, maintenance of minimum balance is not required.
- ATM card/ ATM cum Debit card, Rupay card will be given for the account holders.
- There are going to be no limit on the number of deposits that can be made in a month but, account holders will be allowed most of 4 withdrawals in a month, which includes ATM withdrawals also.
- The above facilities will be given without any charge. There will be no charge levied for non-operation/ activation of in-operative basic saving bank deposit account.
- For this account, overdraft facility will be provided up to Rs. 5000/-.
b) Basic Saving bank Deposit Accounts Small scheme (BSBDS)
- These are accounts with relaxed KYC, with a minimum document requirement of self-attested address proof & photograph.
- Total credit should not exceed 1Lakh rupees in a year.
- Maximum balance should not exceed Rs. 50,000/- at any time.
- Cash withdrawals & transfers must not exceed Rs.10, 000/- in a month.
- Remittance from foreign account cannot be credited to this account without completing normal KYC formalities.
- This account can be opened only at Core Banking Solution linked branches of banks or at such branches, where it is possible to manually monitor the fulfillments of the conditions.
A current account, also known as financial account is a type of deposit account maintained by individuals who carry out significantly higher number of transactions with banks on a regular basis. It is created by the bank on request of the applicant and is made available for frequent or immediate access. Current accounts relate to liquid deposits and it offers a broad range of customized options to aid financial dealings. Current accounts also allows to make payments to creditors through the cheque facility offered by the bank. Generally, current accounts do not provide interests and requires a higher minimum balance when compared to savings account. However, the greatest advantage of current bank account is that, account holders can easily avail overdraft facility up to an agreed limit.
Features of a Current Bank Account
A current bank account is one of the primary requirements for starting a business. These days, banks offer a number of attractive offers and benefits on current accounts to match the diversified needs of businesses. Listed below are some of the basic features of a current bank account:
- A current account allows transactions beyond the scope of a savings account
- Compared to savings account, a current account requires a higher minimum balance
- It is designed to facilitate frequent transactions – transfer funds, receive cheques, cash, etc.
- A current account can be operated by individuals, proprietary concerns, public and private companies, associations, trusts, etc.
- No restriction on the number of transactions in a day
- Non-maintenance of the minimum balance can attract penalty charges
- Just like savings account, KYC guidelines are to be followed even for current accounts
- For a single business, there cannot be multiple current accounts
- The prime objective of current account is to facilitate smooth transactions for businesses
- Nowadays, some banks offer interest rates on current accounts as well
- Current accounts charge interests on short-term funds the account holder has borrowed from the bank.
Benefits of a Current Account
- Allows for prompt business transactions
- No limit on withdrawals
- No limit on deposits in the home branch
- Enables businessmen to make direct payments using cheques, demand drafts, or pay orders
- Provides overdraft facility
- Provides internet banking and mobile banking facilities.
Difference between Current Account and Savings Account
|Savings Account||Current Account|
|A savings accounts are deposit accounts which do not allow unlimited transactions||A current account on the other hand is meant for daily financial transactions|
|Savings accounts are best suited for salaried employees or people with a monthly income||Current accounts are ideal for individuals and firms that need to carry out monetary transactions on a day-to-day basis|
|Savings accounts earn interests which is normally in the range of 4% to 8%||Current accounts are non-interest bearing deposit accounts|
|Banks do not provide overdraft facility on savings account||Overdraft facility is provided|
|The minimum balance required to open a savings account is very low||The minimum balance for opening a current account is comparatively much higher|
|The main purpose of a savings account is to encourage people towards savings||The main purpose of a current account is to help individuals with multiple transactions|
Recurring Deposit Account
A Recurring Deposit or RD as it is commonly called is a unique term deposit offered by banks. It is an investment tool which permits those with an ability to make regular deposits earn decent returns on their investment. Basically consisting of regular deposits and an interest component, a Recurring Deposits provides flexibility and ease of use to individuals. Account holders can choose to invest a particular amount each month, ensuring that they have sufficient income for an emergency, with the RD earning decent interest on the amount. Given the fact that FDs are rigid and are not ideal for short terms, a Recurring Deposit is an ideal investment cum savings option.
Features of Recurring Deposit Account
RD offers you a fixed interest on the invested amount at a specific frequency till the pre-determined term or up on maturity. At the end of the term, the amount upon maturity(which is your invested capital) along with remaining or accumulated interest is paid.
The main features of Recurring Deposit account are as follows:-
- Recurring Deposit schemes aim to inculcate a regular habit of saving among the public.
- Minimum amount that can be deposited varies from bank to bank. It can be an amount as small as Rs.10.
- The minimum period of deposit starts at six months and the maximum period of deposit is ten years.
- The rate of interest is equal to that offered for a Fixed Deposit and is hence higher than any other Savings scheme.
- Premature and mid term withdrawals are not allowed. However, the bank may allow to close the account before the maturity period, sometimes with a penalty for premature withdrawal.
RD offers the additional benefit of taking loan against the deposit, i.e., by using the deposit as a collateral. About 80 to 90% of the deposit value can be given as loan to the account holder.
- The Recurring Deposit can be funded periodically through Standing Instructions which are the instructions given by the customer to the bank to credit the Recurring Deposit account every month from his/her Savings or Current account.
Duration of Recurring Deposit
Customers can open a Recurring Deposit account with a bank, where the compounding of interest will be done on quarterly basis. The deposit term starts with a minimum period of 6 months, and after that they can choose to increase the tenure in multiples of 3 months up to a maximum period of 10 years. The minimum period for a RD varies from bank to bank. Some banks specify 24 months as minimum duration.
Loan against Recurring Deposit
A loan or an overdraft, can be availed against the recurring deposit. An individual can avail a loan of up to 75 to 90% of the deposit amount, depending on the bank’s terms and conditions. This is a fruitful option, especially in case of emergency, as interest keeps getting credited and the loan is available at a lower interest rate, as compared to a personal loan.
Recurring Deposits for NRI/NRE
One of the best investment options for NRIs/NREs is a recurring deposit account. Huge savings can be made using small monthly investments. NRIs can either invest in either NRO or NRE Recurring Deposit accounts.
- NRE RD Accounts: In this savings option, the investments towards deposit installments are credited from the NRE accounts. An NRE is a non-resident external account, where the accrued is exempted from taxes in India. This account can also be moved back to the investor’s home country, without any hassle.
- NRO RD Accounts: For these accounts, the investments towards the deposit installments can come either from NRE or NRO accounts. NRO are non-resident ordinary accounts. The interest from NRO RDs is taxable at a rate of 30%, plus the additional CESS. This is repatriable, subject to certain featured requisites.
Fixed Deposit Account
a) SHORT DEPOSIT RECEIPT
- Banks accepts deposits from customers varying from 7 days to a maximum of 10 years.
- The period of 7 days & above but not exceeding 179 days deposits is classified as ‘Short Deposits’.
- The minimum amount that can be deposited under this scheme is Rs. 5 lakh for a period of 7-14 days.
b) FIXED DEPOSIT RECEIPT
- Any resident individual- single accounts, two or more individuals in joint accounts, Associations, Minors, societies, clubs etc., are eligible for this account.
- The minimum FDR in metro & Urban branches is Rs. 10,000/- & in rural & semi urban & for Senior citizens is Rs.5000/- .
- For the subsidy kept under the government sponsored schemes, Margin money, earnest money & court attached/ordered deposits, minimum amount criteria will not be applicable.
- Depositors may ask for repayment of their deposits before maturity. Repayment of amount before maturity is allowable.
- Interest rate differs from bank to bank depending upon the tenure of the deposits & as when the bank changes the rate.
- Additional interest of 0.50% is offered for senior citizens on deposits placed for a year & above.
Demat Account or dematerialized account provides the facility of holding shares and securities in electronic format. During online trading, shares are bought and held in a demat account, thus facilitating easy trade for the users. A Demat Account holds all the investments an individual makes in shares, government securities, exchange traded funds, bonds and mutual funds in one place.
For opening this account, an individual has to fill a form, submit a photo of the applicant along with a photocopy of Voter ID/ Passport/ Aadhar card/ Driving License & Demat account number will be provided to the applicant immediately after the completion of processing of the application.
a) NRO ( Non-Resident Ordinary Rupees) Account
b) NRE ( Non-Resident External Rupees) Account
c) FCNR ( Foreign Currency Non-Resident ) Account
Foreign Currency Non Resident (Bank) Account
FCNR (B) deposit account is similar to a usual Bank FD account and provides nomination facility and the nominee for the account can be a resident Indian. Also, FCNR (B) can be closed prematurely however to be entitled to earn interest the deposit should remain with the bank for a minimum of 1 year.
Non-Resident External Rupee Account
Non-Resident Ordinary Rupee Account
Any person resident outside India may open NRO account with an authorized dealer or an authorized bank for the purpose of putting through bonafide transaction in rupees. NRO accounts can be opened in the form of current, savings, recurring or fixed deposit accounts.
Difference between FCNR, NRE and NRO
|Particulars||FCNR (B) Account||NRE||NRO Account|
|Joint account of two or more NRIs||Permitted||Permitted||Permitted|
|Joint account with another person resident in India||Not Permitted||Not Permitted||Permitted|
|Currency in which account is denominated||Pound Sterling/ US Dollar/Jap.Yen/Euro||Indian Rupees||Indian Rupees|
|Repatriability – Principal||Freely repatriable||Freely repatriable||Not repatriable (except current income like rent, dividend, pension etc. and remittances indicated under “Repatriation of NRO Funds”)|
|Interest||Freely repatriable||Freely repatriable||Freely repatriable|
|Foreign currency risk||Account holder is protected against changes in INR value vis-à-vis the currency in which the account is denominated.||Account holder is exposed to the fluctuations in the value of INR.||Account holder is exposed to the fluctuations, in the value of INR to the extent of interest amount.|
|Type of accounts||Term deposits only.||Current, Savings, Recurring, Fixed Deposits.||Current, Savings, Recurring, Fixed Deposits.|
|Period of fixed deposits||For terms not less than 1 year and not exceeding 3 years||For the periods as announced by the deposit taking bank.||For the periods as announced by the deposit taking bank.|
|Rate of interest||Banks are free to determine interest rates within the ceiling, if any, prescribed by the Reserve Bank||Banks are free to determine interest rates.||Banks are free to determine interest rates.|
|Rupee Loans in India to
|Foreign currency loans outside India to