Types of Bank Accounts Exist in India With Features

In this article, we will learn about different types of bank accounts. In India commercial banks are divided into four categories: Public or Nationalized banks, Private banks, Foreign Banks, and Cooperative banks. Now traditionally, banks in India have six types of deposit accounts

1. Current Account
2. Savings Account
3. Recurring Deposit Account
4. Fixed Deposit (FD) Account
5. Salary Account
6. NRI Account

Let us see what exactly are these six bank accounts and which account suits your requirements.

1. Current Account

The current account is mainly for business persons, firms, companies for public enterprise, etc and they’re never used for the purpose of investment or saving. So whenever you hear the name current it means not for a common person it is for business people, firms, companies, and public enterprises.

Key Features of a Current Account

• These deposits are the most liquid deposits and there are no limits on the number of transactions.
• Since it is a business account you can withdraw or do transactions any number of times so at any point in time we can redraw your money.
• There will be no charge you can carry as many transactions as you want.

Now there is no interest paid on the amount held in the account. For example, if you have 1 lakh rupees in your current account. You will not get any interest from the bank on this balance. Banks charge certain service charges on such accounts. Now since it’s a business account and there are so many transactions banks will charge certain service charges on these accounts.

So the current accounts do not have any fixed maturity as they are on a continuous basis account. It is a pay-as-you-go it’s like a prepaid account. You have the money you put in, you take it out, you do the transactions, you paid to the vendors the people who have you want to pay that’s it. So the current account is mainly for business person firms, companies, and public enterprises, and is never used for the purpose of types of investment.

2. Savings Account

A saving account is for the common man. The first thing that should come to your mind when you hear the word saving account is the common man. It is for saving purposes. Any individual either single or joined can open a savings account. Most of the salaried person pensioners in students use saving accounts.

Key Features of a Savings Account

• The advantage of having saving accounts is that banks pay interest for the saving. For example, if you have 1 lakh rupees in your savings bank account you will be earning around four to six percent interest on this account. In the current account, there was no interest. So the saving account holder is allowed to withdraw money from the account as and when required.
• In Saving Bank, you can withdraw your money anytime you require. So you must have seen long lines in front of ATMs. Normally people withdraw from these savings bank accounts through ATMs.
• Now the rate of interest is between four to six percent on whatever deposit you have in a savings bank account.
• There is no restriction on the number and amount of deposit. You can deposit as much amount as you want in your savings bank account.
• There are also small saving bank account that allows you to transact of only one lakh rupees per year but if you have a complete saving bank account but no limitations then you can resume withdrawing and depositing as many times. But withdrawals are subject to certain restrictions.
• Many banks may allow only 10 withdrawals per month on a free basis through ATMs. After 10 you may have to pay a charge of 5 rupees or 20 rupees whatever the bank wants to charge. Now some banks recommend maintaining a minimum amount for keeping it functional.

If you go and open a savings bank account in private banks they will ask you to keep a minimum 10,000 balance for the account to function and if you do not maintain 10 thousand rupees on monthly basis they will charge certain fees from this saving account.

So if you want to have a savings account without any minimum balance please go to a public sector bank. They will open a free savings bank account in which you don’t have to maintain any balance.

3. Recurring Deposit Account

A recurring deposit or RD account is opened by those who want to save a certain amount of money regularly for a certain period of time and earn a higher rate of interest. For example, 2 years from now I want to buy a car. Let’s take I want to buy a Maruti Suzuki creta. This is a car which is around 10 to 12 lakhs. For that, for the next 2 years, I need to invest. I need to save a certain amount of money every month.

So what do I do? I open a recurring deposit account. So every month in my bank account I am going to save 20 thousand rupees or whatever the amount is for two years? A recurring deposit is a savings account. It is a form of deposit account in which you can keep a certain amount of money every month and it gives you interest.

So by the time two years are complete, you will get not only the entire principal amount that you have saved but also the interest on it. So in the recurring deposit account, a fixed amount is deposited every month for a specified period and the total amount is repaid with interest at the end of the particular fixed period.

Key Features of a Recurring Deposit Account

• The period of deposit is a minimum of six months and a maximum of ten years.
• The interest rates vary and depend upon different banks also on the amount as well.
• No withdrawals are allowed as it’s a deposit account and the amount will be fixed for that period of time.
• However, the banks may allow closing the account before maturity periods as well. These days you can close the account in case you would require the money early.

So this is how a recurring bank account functions. A recurring deposit account or RDA account is opened by those who want to save a certain amount of money regularly for a certain period of time and earn a higher rate of interest.

4. Fixed Deposit (FD) Account

Fixed deposit as the word says this amount will be fixed for a certain period of time. For example, I have 1 lakh rupees and I want to invest this amount for five years. So what the bank will do.

The bank will open a fixed deposit account and will invest and put my 1 lakh rupees in this account and will lock this amount for the period of five years. So I cannot take my money before five years because I will not get the benefit of the interest rate. So if I want to continue for five years and I will get a good amount of interest on this amount.

Key Features of a Fixed Deposit Account

• In the fixed deposit account, a particular sum of money is deposited in a bank for a specific period of time.
• It is a one-time deposit and a one-time takeaway.
• This account cannot be withdrawn before the expiry of the period. However, in case of need, the depositor can ask for closing the fixed deposit prematurely by paying a penalty. The penalty amount varies with Bank.
• A high-interest rate is paid on a fixed deposit. The rate of interest paid for fixed deposits varies according to amount duration and also from one bank to the other.

So in a fixed deposit (also known as FD Account), a particular sum of money is deposited in a bank for a specific period of time.

5. Salary Account

Salary Account is opened due to the tie-up between the employer and the bank. So because of the tie-up between the employer and the bank this account is to be opened and your salary credited into this particular account.

Key Features of a Salary Account

• There is no limit to how much money can be put in a salary account.
• It is also a type of saving account in which banks don’t give any interest.
• At any time you can convert your salary account into a savings account.
• Salary accounts are zero-balance accounts in which account holders don’t have to maintain a minimum balance.

6. NRI Account

An NRI Account also known as an overseas account that is opened by a Non-Resident Indian (NRI) or a Person of Indian Origin who is authorized to maintain a financial bank account in India.

There are three kinds of NRI accounts that can be opened by NRI:

NRO : Non-residential ordinary account or FD account

The money deposited is from those who have an income source in India

NRE : Non-residential external account or FD account

The money deposited is earnings or savings from the country where the non-resident Indian lives.

FCNR : Foreign Currency Non-residential account

This account is maintained in foreign currency. The money is deposited in an approved currency in which an NRI earn their income.

I hope this article would have given you a lot of valuable insight into the bank accounts because most youngsters who are applying for a bank account may not be knowing what different kinds of accounts they can apply for and how they can take advantage of their investment.

So if you have extra money and if you want to invest it on a regular monthly basis you can open a recurring deposit, if you have a big amount you can open a fixed deposit account you can invest it for a period of five years and if you want to do normal transactions you can open the saving account and if you are a business person you can open a current account. I hope this article answers all your queries.