Types of Bank Accounts and Functions in India www.deekpay.com

Banks in India are generally divided into four categories: private banks, public sector or state-owned banks, foreign banks and co-operative banks. All four types of banks allow citizens to startIndian bank accounts.

To understand how to choose the right bank account, you need to know the types of bank accounts offered by all four types of banks.

There are sixIndian bank accountsAvailable:

1. Savings accounts

These deposit accounts are designed to help consumers save money. Anyone in India who holds Aadhaar Card and PAN Card (Permanent Account Number card) can open a savings account for any individual, and both cards must be held to open a bank account in India.

Key features of savings accounts

Limitations: There is no limit to the amount of money that can be deposited in a savings account. In some cases, the number of transactions may be limited, depending on your bank.

Balance: In most cases, consumers need to maintain a mandatory minimum balance to maintain a savings account.

The exceptions to the minimum balance requirement are specific accounts, such as those under the Indian federal government's programme known as thePradhan Mantri Jan Dhan Yojana (PMJDY) Savings accounts opened under the Financial Inclusion Programme (FIP).

foundation PMJDYIn addition, each person has a zero-balance savings account. These accounts are basic savings bank deposit accounts, which limit the number and amount of deposits and withdrawals to a maximum of four times a month, including ATM withdrawals.

Interest: Consumers earn interest on deposits in their savings accounts. This interest rate varies from bank to bank. For example, India's largest public sector bankState Bank of India(SBIThe interest rate on savings bank deposits with account balances up to INR 100,000 is 2.70%. And India's largest private sector bank HDFC The interest rate on savings bank deposits is 3% for banks with account balances below INR 5 lakhs.

Benefit: Savings accounts are the easiest way to earn interest on idle bank funds.

2. Current accounts

Current accounts are primarily business accounts where funds are frequently transferred between financial accounts. These accounts are best suited for companies and business owners to conduct transactions for day-to-day business activities.

Main features of the current account

Limitations: There is no limit to the amount that can be deposited in a current account. There are also no transaction limits on current accounts.

Balance: The minimum balance requirement for current accounts is higher than for savings accounts.

Interest: consumers will not earn any interest on their current accounts.

Benefit: These accounts allow an overdraft feature that allows consumers to withdraw more money from the account than is actually in the account.

3. Payroll accounts

These accounts are opened by banks in response to requests from large companies and corporations that pay their employees through banks. Each employee is eligible to maintain a payroll account in which the company they work for can credit their monthly salary.

Main features of the payroll account

Limitations: There is no limit to the amount of money that can be deposited in a payroll account. Each employee receives a salary based on his/her employee's expenses. Employees can make independent transactions, between such a bank account and another bank account.

Balance: The payroll account is a zero-balance account and employees can withdraw all funds deposited in the account at any time.

Interest: employees do not earn any interest on their payroll accounts.

Benefits: These accounts can be converted to savings accounts at any time. If they remain idle for more than three months, banks have the right to convert them into savings accounts, although the rules are different.

4. NRI accounts

These accounts are opened by Non-Resident Indians (NRIs) who wish to maintain a financial bank account in India. Three types of NRI accounts can be opened:

Non-Residential General Account (NRO)

These accounts hold deposits in Indian rupee denominations. The funds deposited are derived from earnings earned in India.

Key features of NRO

Limit: There is no limit to the amount that can be deposited in an NRO account.

Balance: Any number of balances can be maintained.

Interest: the principal and the interest earned on that principal are in the taxable category.

Benefit: These accounts are not affected by the conversion rate. NRIs can open current accounts, savings accounts or fixed deposit accounts through NRO accounts.

Non-Residential External Accounts (NRE)

These accounts hold deposits in Indian rupee denominations. However, the funds deposited are not derived from earnings earned in India; in other words, the money deposited is income or savings in the country of residence of the non-resident Indian.

Key features of NRE

Limit: There is no limit to the amount that can be deposited in an NRE account.

Balance: any number of balances can be maintained.

Interest: Interest earned on principal and principal is not a taxable category.

Benefit: These accounts are exposed to potential changes in conversion rates. NRIs can open current accounts, savings accounts or fixed deposit accounts through NRE accounts.

Foreign Currency Non-Residential Account (FCNR)

These accounts hold deposits in currencies approved by the Reserve Bank of India, the central bank of India. Any NRI or person of Indian origin can hold deposits in approved currencies and earn income from them. If the income is earned in a currency other than the list of approved currencies, the approved currency is selected for converting the income or depositing the proceeds. FCNR accounts are commonly referred to as FCNR (B) accounts where (B) stands for Bank.

Key Features of FCNR

Limitations: There is no limit to the amount of money that can be deposited in an FCNR account.

Balance: Any number of balances can be maintained.

Interest: the principal and the interest earned on that principal are not taxable categories.

Benefit: These accounts are subject to changes in exchange rate expectations. NRIs can only open fixed deposit accounts with a maturity of at least one year through FCNR accounts.

5. Term deposit (RD) accounts

These are deposit accounts opened by consumers interested in earning interest. These accounts, often referred to as RDs, are the easiest way to earn more than a savings account.

Key features of time deposits

Limitations: The minimum limit for opening an RD varies from bank to bank. Consumers can opt for a minimum limit as low as INR 1,000 per month and open an RD account with any bank of their choice.

Balance: RDs are deposit accounts that allow consumers to collect a monthly amount set at the beginning of the account's useful life.

Interest: A fixed amount is deducted and deposited into an RD account each month, earning interest on a monthly basis. This interest is usually higher than savings accounts.

Benefit: The flexible tenure of RDs makes them a consumer-friendly financial decision. Consumers can choose to deposit money in an RD for terms ranging from 6 months to 10 years and earn interest on the amount deposited. RD accounts can be terminated before the end of the term without losing the interest earned.

6. Fixed deposit (FD) accounts

These accounts are opened to earn interest on fixed deposits until maturity. Fixed deposits are one of the safest financial instruments to save idle funds and earn interest.

Key features of time deposits

Limitations: There is no limit to the amount that can be deposited in a time deposit account. The higher the allocation of funds, the more interest will be paid at the end of the term of the account.

Balance: FD accounts hold lump sum amounts as investments.

Interest: The bank pays interest on this deposit. This interest is paid at the end of the FD term. Once the FD is broken in the middle of the term, the consumer runs the risk of losing the interest and usually only receiving the principal.

Benefit: FDs are risk-free, high-return investments. Most of the banks in India offer FD rates higher than savings account rates and RD rates as banks enjoy the fixed maturity benefit of FDs. Banks can hold large sums of money for a fixed term and consumers get higher volatility-free returns, making this financial instrument a win-win for both banks and consumers.

The banking sector in India is tailored by both public sector and private sector banks to cater to the varying requirements of different age groups and genders.

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