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Indian Bank Account Types

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Indian Bank Account Types

Types of Bank Accounts

shape Introduction

A Bank Account is a financial account maintained by a financial institution for a customer. The primary four Indian Bank Account Types are Savings Account, Current Account, Recurring Deposits and, Fixed Deposits. The Indian Bank Account Types represents the funds that a customer has entrusted to the financial institution and from which the customer can make withdrawals. Alternatively, accounts may be loan accounts in which case the customer can borrow money from banks and owes money to the bank.


shape Accounts

Savings account are basically for individuals and small businesses. This is not for large businesses.

These accounts can be opened individually or jointly.

Another important point is, this is normally intended for person above 18 years of age but person b/w 10 to 18 years can also open individually without guardian but with some restrictions. Minor accounts i.e below 10 years accounts has to be opened with guardian only.
Salient Features of Saving Bank Account:

  • Saving Bank account is basically for individuals and small businesses.

  • The objective of saving bank account is to promote savings.

  • The rate of interest payable is very nominal on saving accounts. At present it is 4%

  • Minimum Balance – (varies from bank to bank) – Normally Rs. 500 (without cheque book facility)

  • Normally Rs. 1000 (with cheque book facility)

  • Some banks like – HDFC, ICICI Bank – allow premium savings a/c deposits with minimum balance of Rs. 5000 or Rs. 10000.

  • Bank offer zero balance accounts previously known as No – frills accounts / BSBDA and now under PMJDY


What is Regulation and De-Regulation?
From 25 Oct 2011 the interest rate of Saving Account is deregulated by RBI.
If somebody (RBI) is controlling then it is regulation, if you (banks) are controlling i.e deregulation.

Current account are for big businesses, companies and institutions such as school, colleges etc., a big business do lot many transactions across the country. Since there are restriction on number of withdrawals from saving bank account, this type of account is not suitable for them. They need to have an account from which withdrawal can be made any no. of times.
Salient Features of Current Account:

  • Firms & companies are eligible to open account.

  • Current bank accounts are operated to run a business.

  • It is a non-interest bearing bank account.

  • No limit on either the number of transactions or the maximum amount of transactions

  • Overdraft facility (short term loan facility) is available

  • It needs a higher minimum balance to be maintained as compared to the savings account.

  • Savings Account Current Account
    Bank pays interest on daily basis Bank does not pay any interest on current
    account.
    Restriction on the number and amount of
    withdrawals
    There is no restriction on the number and amount
    of withdrawals
    SA can be opened by individuals, small businesses
    and students, etc.
    Current Accounts are for big businesses,
    companies and institutions, etc.
    omination facility is available for SA deposits. Nomination facility is normally not available for CA
    deposits.


    CASA Ratio: The Ratio of the deposits in the form of Current Account & Saving Account to the total deposits is known as CASA Ratio (normally expressed in %). More CASA ratio banks are in the safe zone. ICICI, AXIS, HDFC & SBI have CASA Ratio more than 40%.

    These deposits are TIME deposits (as for specified agreed period b/w you and the bank). In these deposits interest paid by the bank is slightly higher than CA & SA. It’s like “sabar ka fal mitha hota hai”.

    Salient Features of FD

    • Fixed Deposit can be operated for a tenure ranging from 7 days to 10 years in Indian banking system.

    • Not payable on demand and do not enjoy cheque facility.

    • Present interest on FD is 8.75% but Interest rate may increases with the time period

    • Interest rates will be slightly higher for senior citizens (60 + years of age)

    • Premature withdrawal of the deposits is possible, but it attracts penalty at the rates varying from 0.5% to 1.5%

    • If the deposits are Rs. 1 Crore or more, they come under bulk deposits and interest rates may vary further.

    • Loan facility is available on principal as well as on interest.

    But in FD you have to pay income tax:If your interest income exceeds Rs. 10000 banks will deduct TDS (Tax diretionate source) i.e banks itself will deduct income tax.
    Salient Features of RD

    • In India, minimum amount that can be deposited is Rs.10 at regular intervals.

    • The period of deposit is minimum six months and maximum ten years. (Minimum tenure varies banks to banks. Some banks allow minimum tenure in RD for 3 months.)

    • Minimum balance can be deposited under RD is Rs. 500 per month and thereafter in multiples of Rs 100/-
      The rate of interest is higher.

    Non-Resident Deposits:
    These accounts are only held by Non-resident Indians. Currently, there are three types of Non-Resident Deposits accounts in India
    A. Foreign currency Non-Resident (Banks)- FCNR (B):

    • These accounts only can open and maintained in the foreign currency.

    • These accounts can be opened in following currencies viz., US dollar, Pound Sterling, Euro, Japanese Yen, Canadian Dollar and Australian Dollar.

    • Only Term deposit is allowed.

    • These accounts are non-taxable in India.

    • In these accounts, principal amount and the interest are fully repatriable.

    Repatriable Defined as sending or bringing money back to the foreign country.

    B. Non-Resident External Rupee Account (NRE):

    • These accounts held in Indian Rupee.

    • Term deposits and Saving Deposits are allowed.

    • These accounts are also non-taxable in India.

    • In these accounts, principal amount and the interest are fully reparable.


    C. Non-Resident Ordinary Rupee Account (NRO):

    • Anyone Individual residing outside India is eligible.

    • If Indian resident migrated abroad can shift his account to this category.

    • Term deposits and Saving Deposits are allowed.

    • These accounts are taxable in India.

    • In these accounts, the principal amount is non-repatriable.

    • Interest amount can be repatriable.


    2. DEMAT Account
    DEMAT stands for Dematerialised. These accounts used to transact shares in electronic format.

    3. Nostro Account:
    These accounts are held by Indian Banks in foreign Banks in foreign currency.
    Example: Punjab National Bank has an account in Bank of America in dollars.

    4. Vostro Account:
    These accounts are held by foreign banks in India in Indian Rupees.
    Example:Bank of America has an account in Punjab National Bank in Indian Rupees.

    5. Escrow Account:
    It is the temporary pass through an account held by third parties during the transaction between two parties.

    6. GILT Account:
    These accounts are maintained by investors with the Primary dealers for holding their Government
    securities and Treasury bills in the Demat form.