Types of bank account you can own in India

Banking services in India have come a long way since the first bank was established in 1786. Today, there are various types of bank accounts available to customers depending on their needs and requirements. From savings accounts to current accounts, there is a wide range of options for both individuals and businesses. In this article, we will discuss the different types of bank accounts available in India and what they offer. 

1.Savings Bank Account: 

This deposit option is ideal for those who receive regular income and wish to save some money. To explain, the daily wage earners typically prefer savings accounts for their financial needs. Usually, when opening a savings account, you will need to make an initial deposit – the amount of which varies depending on the bank in question. 

You can add funds to your savings account at any point in time. The associated interest rate will be determined by the bank, and it will be paid on the amount you have in your account. You can easily deposit money into this account anytime you want. 

You have different options when it comes to withdrawing money from your savings account like using an ATM card, issuing a cheque and signing a withdrawal form. However, there are certain limitations in regards to the number and amount of withdrawals permitted. 

2. Current account

Designed to meet the specific requirements of businesses and traders, current accounts provide unlimited access to funds and make managing financials much easier. These accounts also offer greater liquidity than other deposit accounts as there is no limit on how many transactions can be made in a day. 

With a current account, you can receive payments on a regular basis. An advantage of these accounts is that withdrawing money is possible even if there are insufficient funds in the balance; however, you don’t get to earn any interest. 

Current accounts bear no interest, however an amount as stipulated by the financial institution must be maintained at all times. Therefore, these accounts come with a minimum balance requirement to be met in order to continue using them. 

3. Salary Account

Having a salary account is a must for those who receive their income from an employer through the bank’s tie-up. This type of account lets your company credit your salary into it each month. There are several features and advantages associated with owning a salary account, such as: 

Salary accounts offer interest on the deposited amount, which varies depending on the bank. Also, there is no minimum balance requirement for these types of accounts. For salary accounts, banks offer ATM cards, debit cards, credit cards, and cheque books.   

In addition, banks offer mobile and internet banking for accessing funds. All fund transfers, including NEFT, IMPS, and RTGS, are also offered at lower rates. With a salary account, you can easily pay bills and avail an overdraft facility. You may even be entitled to preferential pricing for personal & home loans at select banks. 

4. Recurring Deposit Account 

Customers of both public and private banking institutes can open recurring deposit accounts. It’s an investment option where the investor deposits a specified amount at regular intervals for a fixed period of time. At the end of the maturity period, they earn interest from the bank. Investing in instalments helps the investor form a corpus faster. The compounding effect of this method maximizes patronage, leading to more money in the long run.  

A Recurring Deposit Plan is a great way to help you save money on a regular basis. As per the bank, you can make deposits amount of as little as Rs. 1000, with the minimum tenure being six months and the maximum being ten years. This enables everyone to save according to their own financial capability. 

Investing in a fixed deposit account can give you access to higher interest rates than a savings account. However, withdrawing the money too soon may be risky. You can close your bank account before the maturity date but that may come with other consequences.

5. NRI Account 

These accounts are meant to store Indian rupees which are typically sourced from the profits generated within India. This account allows you to conveniently manage your finances in the local currency. 

There’s no restriction on the amount of money that can be put into an NRO account and you’re free to maintain a balance of any amount. However, both principal and interest earned from it are taxable.   

NRO accounts have the benefit that the currency conversion rates will not have an effect on them. Therefore, NRIs can take advantage of this feature and open any type of account such as current, savings or fixed deposit, through their NRO account. 

6. DEMAT Account 

The DEMAT Account, which stands for Dematerialized Account, provides a way to hold share and securities in their digital form. Holding your shares and securities electronically allows you to manage it in a secure and convenient way. 

In India, two main depository organisations handle bank accounts related to bonds & shares – National Securities Depository Limited and Central Depository Services Limited. This ensures smooth trading and convenient transactions of securities. 

Completing KYC is an important step in opening a DEMAT Account and makes trading more efficient. Moreover, transaction costs are minimised and traders can work from any location without having to worry about paperwork for transferring securities.

7. Foreign Currency Non-Resident (FCNR) Account 

RBI authorizes the opening of Foreign Currency Non-Resident (FCNR) Accounts wherein deposits can be made in any of nine available foreign currencies. The selection of benefits and features that come along with this account are attractive enough to make one consider opening an FCNR account. 

FCNR(B) account is a term deposit account specifically for NRIs to deposit money. It is not a savings account. It’s possible to transfer funds from an NRE account into an FCNR (B) account as well. 

NRIs are allowed to deposit money in any of the nine currencies, i.e. USD, GBP, AUD, SGD, CAD, CHF, HKD, EUR and JPY. This must be done in their country of residence’s currency for their investments to go through. 

Banks provide varying rates of interest for FCNR accounts, depending on the kind of currency deposited. Moreover, the interest is only accrued after a year completes and it is entirely exempt from paying taxes in India. 

When investing in FCNR deposits, you can choose a tenure ranging from 1 to 5 years. You do have the option to make premature withdrawals, although there will be a penalty for it. Withdrawals of such deposits would only be accepted in foreign currency. Many banks also offer an overdraft facility on these types of deposits, however the exact terms & conditions may vary between banks. 

Interest and principal amounts can be freely sent to other countries without any restrictions or limitations. This gives investors more flexibility when it comes to taking decisions about their money. 

Final Thoughts  

Indian banking has something for everyone, no matter their age or gender. Public & private sector banks offer tailored services to ensure individuals across the country benefit from financial inclusion and empowerment. 

The nation is taking confident strides to provide financial access to everyone, but awareness and understanding amongst citizens will enable growth that is shared across the population. Such knowledge will be a powerful tool in accelerating the progress already being made. 

TeamDonut

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