Maintaining a bank account in the bank of your choice is one of the essential things that you do with your money. The type of bank account you choose to open lets you how your fund will grow with time.
In India, you can find a number of types of bank accounts offered by financial institutes. Popular banks such as HDFC Bank, ICICI, Axis, SBI and Canara Bank offer various kinds of bank accounts to the public.
Some of the basic types of bank accounts in India can be seen in the chart given below.
| 1 | Savings Bank Account | When you need a personal bank account, you should open a savings bank account. |
| 2 | Current Account | A typical bank account for a business establishment. |
| 3 | Government Savings Scheme | Bank accounts that are government-sponsored. |
| 4 | Fixed Deposit Account | When you want to have a fixed return within a certain period of time, FD is there for you. |
| 5 | Recurring Deposit Account | The best option for saving funds on a monthly basis with zero risk. |
Savings Bank Account
When you want to have a personal bank account, the savings bank account is the one that you need. It’s meant for personal use and the bank gives a specified interest rate for maintaining it.
A savings bank account is an interest-bearing account that gives you the facility to save funds. It allows you to save, spend and send money to any person anywhere.
The savings bank interest rates may vary between the banks. HDFC Bank’s saving rate is 3 to 3.5 percent depending on the account balance. For SBI, the interest rate is 2.7 percent. Likewise, other banks have higher interest but the baseline is usually 2 to 3 percent.
You can see a number of sub-types under a savings bank account. Some of the popular savings accounts are-
Normal Savings Bank Account
A savings bank account with no additional features. Though you may get the basic requirements such as ATM card, internet banking, loan facility etc. It’s a common form of personal bank account. There are charges and fees you have to bear when using this account.
All banks in India, whether it’s private banks, PSU banks, foreign banks or cooperative banks, you can open a savings bank account with the bank of your choice.
Salary Account
A savings bank account for a salaried person. If you are working in an organisation that has a banking arrangement with a particular bank, you may open a salary package account. This sort of SB account is a customised type of bank account that has additional benefits such as waiver of minimum balance requirement.
Other than this, you may get free transaction charges on many services such as waiver on ATM annual maintenance charges, free draft issuance, free cheque issuance and other freebies.
Savings Account for Pensioners
A pension savings bank account is a bank account for retired employees of the state and central government. If you are a pensioner, you can have this account in your name to draw your monthly pension.
NRI Account
Non-resident Indian (NRI) or person of Indian origin (PIO) can open a bank in India. They can have NRI accounts as NRE, NRO or FCNR accounts. These are three bank accounts they can open according to their needs.
NRE- Non-Resident External account is a type of NRI account that allows you to save funds in Indian currency. The need arises when you are earning in foreign currency such as the US dollar or Britain Pound Sterling or any other foreign currency. With your family member, you can open an NRE account with an account mandate as “Former or Survivor”.
NRE account can be opened as a savings bank, current, fixed or recurring deposit account. As per your requirement, you can choose the option and go for it.
The best thing about these accounts is that the internet earned in them is exempted from tax and is manageable with its flexible form of fund transfer facilities.
NRO- Non-Resident Ordinary account is another type of NRI account open in Indian currency only. Like an NRE account, an NRO account can be opened as a savings bank, current, fixed or recurring deposit account.
When you earned in foreign currency and plan to stay there permanently, your bank would advise you to convert your resident bank account to NRO account.
FCNR- Foreign Currency Non-Resident account is basically a fixed deposit account open in foreign currencies. The currencies can be US dollars, Pounds Sterling, Canadian dollars, Japanese Yen etc.
The FD tenure can be chosen as per the bank’s product features. One good thing about the FCNR account is that the interest earned in these accounts is exempted till you hold the NRI status.
Current Account
When you have a business establishment, it’s for sure that you need to have a business current account. Irrespective of the type of business you hold, there is a specific business current account.
Be it a proprietory concern or partnership firm or any other firm, you can have a current account.
A current account does not bear any interest. It’s specially designed for business transactions with an unlimited number of transactions and amounts.
The Advantages of Having a Business Current Account
- It’s easy for the bank during business loan appraisal. This means, if you already have had a banking relationship for the past couple of years, your loan application has a high probability of getting sanctioned.
- Bank can easily verify your business cash flows if you routed all your business dealings with the current account.
- By having a banking relationship, you create goodwill for your establishment.
- It secures your funds otherwise, there is always cash handling risk if you keep money somewhere else.
Fixed Deposit Account
A fixed deposit account is an account that you keep in the bank for a certain period of time. When the period is over, you get the funds along with the interest earned.
It is seen that FD can be opened as a term deposit scheme as well as a special term deposit scheme. There are hardly any differences between the two, but one can notice the difference lies in its interest payout facility and the tenure of FD.
In TDR, you may enjoy a monthly interest payout which is not available with the STDR or special terms. You may also find TDR in a short period of time. For instance, FD of 7 days. This is not possible with STDs.
Various forms of fixed deposits can be seen in Indian banks. Some of the banks such as SBI, HDFC, Axis Bank, ICICI and Canara Bank offer FDs with decent interest rates. You may find them in the range of 7 to 8 percent per annum.
Overall, fixed deposit schemes are a reliable mode of investment as it attracts zero risk. The amount that you deposit in FDs is secured and this can be used as a security for availing personal loans too.
Chart of interest variations among popular banks in India.
Recurring Deposit Account
When you are looking for a monthly savings plan at zero risk, you should go for a recurring deposit account. It is the simplest form of saving funds in the bank on a regular basis.
The scheme is quite nice managing for future needs. For instance, if you want to buy stuff that would cost you 50000, you can plan accordingly and make one RD for a specific amount to meet the required amount.
If you want to get it done in a year, you have to open an RD of 4167 and if you can wait for 2 years, it would be 2084.
Likewise, you can plan your every expense and stop relying on credit cards or bulk expenses. In the long run, you would be able to save more funds.
Moreover, interest rates on the RD account are the same as that of the FD account. This means, managing future expenses along with interest income. How cool is that?
Government Schemes
Government-backed deposit schemes are popular in the Indian banking system. This is because most of the government-sponsored schemes are delivered through banking channels only.
For instance, you may find most bank in India has a licence to deliver schemes in favour of the government. These schemes can be Public Provident Fund, Senior Citizen Savings Schemes, Sukanya Samridhi Yojana and the like.
PPF Account
A Public Provident Fund account is a government-sponsored deposit scheme that allows you to save funds as well as tax benefits.
If you are looking for the safest investment which can give you tax exemption benefits, PPF is the one that you should go for.
You can invest as small as 500 to a maximum capping at 1.5 lakhs per year. Under section 80C of the income tax act, the entire principal amount along with the interest earned is exempted from wealth tax and TDS.
It invested amount can also be used for declaring your rebate on taxable income.
The PPF interest rate keeps on changing every quarter as announced by the finance department. As of now, it’s 7.4 percent. With zero risk, 7.4 is quite decent. Moreover, you can withdraw the invested funds after the 5th financial year.
PPF account will be running for 15 years, the withdrawal will be eligible after the 5th financial year and you get the tax benefit. Best choice if you want to play safe.
Senior Citizen Savings Schemes
If you are a retiree and got some funds post-retirement. You may go for the SCSS deposit scheme. Like the PPF account, the SCSS account is also a government-backed deposit scheme.
The scheme allows generating alternate income from the lump sum deposit in this account. At present the interest rate is 8.1 percent with the option to get quarterly interest payout.
If you are expected to pay a certain kind of payment every quarter to any party. You can set your fund to do the task for you. Your money will earn and pay the rent, how cool is that?
Just recently, the eligible investment amount has been increased to 30 lacs and some changes to the withdrawal option.
But, you can still use it in the old fashion, put your money for 5 years. Take out the interest you earned every quarter. And do whatever you please to do.
Sukanya Samridhi Account
If you have a daughter who is below 10 years of age. If you think of saving funds for her, the Sukanya Samridhi account is one of the best choices you get.
The scheme is devised by the government in such a way that it could give minimum benefits to the girl child when she enters adulthood.
In India, there are places where the status of the girl child is far below the male counterpart. To enhance their living standard, the government has come out with such a nice product that is enjoyed by common people all over the country.
The scheme can be availed from any bank in India, including PSU banks and private banks.
When you open a sukanya samridhi account for your daughter, either it has open with you as a guardian or you can put your wife as guardian. The scheme will be running for 21 years or till the girl child gets married. Whichever earlier, the fund can be withdrawn.
Every year you have to deposit a minimum amount of 500 with a maximum capping of 1.5 lakhs per year. The interest rate is as per the government announcement. At present it’s at 7.3 percent per annum.
Conclusion
In fact, the banking system in India is humongous. There are a number of popular banks which are quite good in their customer services too. Opening a bank account in these banks does not have to be difficult. With a little basic knowledge of products, you can choose a better bank account as per your needs.
For personal use, a savings bank account is the best choice. Though you can have a current account in your personal name, it does not give any benefits. For business purposes, you have a business current account.
For maximising your funds with zero risks, you have fixed deposit schemes with attractive interest rates. You can explore the monthly recurring plan such as recurring deposits and annuity deposits.
To sum up, the bank accounts that can be opened in India are savings bank accounts, business current accounts, fixed and recurring deposits accounts and government-backed deposit schemes account.
