A bank account is a financial account offered as a service by banks to the public to deposit money for savings, business, and investment purposes. In India, there are four types of bank accounts which are most popular and used by all.
Savings Bank Accounts:
This is one of India’s most popular accounts. As the same suggests, the aim of savings account is to encourage a savings habit among the public. These accounts can only be opened in the name of individuals.
When one opens such an account, the owner of the account is presented with a passbook, an ATM card, and a chequebook. There are a few restrictions on the amount of transactions that can be done per day on these accounts.
One of the most attractive features of such an account is the interest earned on the money in the account. The rate of interest differs from bank to bank. The Reserve Bank of India (RBI) till 2011 regulated the rate of interest given by banks. However, after October 2011, the RBI deregulated the interest rates and banks were given freedom to decide on the interest rate. This has led to a completion among many banks from some offering 4% to some going up to 6-7%.
When opening such accounts, one has to enquire about minimum balance. Some banks require the account holder to always have a minimum balance in the account, but the RBI has stated that banks are required to provide zero balance accounts where if the minimum balance reaches zero, you won’t be levied a fine by the bank.
Such an account is meant for businesses and business related transactions. These accounts can be opened under the name of a firm or a company. They are opened to business conduct their transactions in a smooth manner.
A chequebook facility is given to all account holders. Current accounts, unlike savings accounts, do not have a restriction on the number of withdrawals or deposit or usage of cheques. Banks do not pay interest on such accounts. However, in recent times, some banks have introduced special current accounts where interest is paid according to the bank’s own criteria.
There is a minimum balance requirement when it comes to current accounts. Most banks require the minimum balance to be INR 5,000 or INR 10,000.
Recurring Deposit Account:
A Recurring Deposit or RD as they are popularly known are for people who can deposit a small amount of money every month and want to earn a decent interest on it.
These accounts can be opened under single or joint names. Under such accounts, a person deposits a fixed sum of money every month, the amount has to be deposited every month without fail, a default attracts a penalty. However, certain banks allow variable payments where the deposit amount can vary, the account holder can deposit higher amounts too up to a certain upper limit.
The maturity period ranges from six months to 10 years. A default in monthly payments reduces the interest earned. Premature withdrawal of the account balance is allowed, however, you need to pay a penalty for it. The account holder is given a passbook to keep a check on the balance and interest earned. The people who open an RD are often those who intend to save money for a particular goal. (Children’s education, marriage, car etc.)
Fixed Deposit Accounts:
They are popularly known as FD accounts. They are mainly used by people who want to deposit a lump sum amount of money for a certain period of time and earn interest on it. The maturity period ranges from seven months to 10 years.
The rate of interest is high on FDs which attracts a lot of people. It’s a great investment tool and very popular across India. Account holders are permitted to withdraw the amount before maturity, it will attract a penalty, though. Account holders have the option of directing the interest paid to be deposited into their savings account or current account.
Today, many banks have developed new accounts keeping in mind the needs of the people. However, most people still use the above-mentioned bank accounts and look for banks which offer these services with minimum documentation and attractive interest rates. Banks like Axis Bank are a good bet, they are known for good customer services and great offers.