Types of Bank Accounts in India (Deposit Accounts)

BANK
A bank is a financial institution and a financial intermediary that

accepts deposits and channels those deposits into lending activities, either directly
by loaning or indirectly through capital markets. A bank links together customers
that have capital deficits and customers with capital surpluses. The word bank was
borrowed in Middle English from Middle French banque, from Old Italian banca,
from Old High German banc, bank "bench, counter". Benches were used as desks
or exchange counters during the Renaissance by Florentine bankers, who used to
make their transactions atop desks covered by green tablecloths.
Advantages of banking
Commercial banking can help a small business by making it easier to manage day-
to-day financial tasks. An established commercial account with a bank will make it
easier to borrow money when you grow your business. Often a business is assigned
a representative who works directly with the company to find the best services and
solutions for the issues the business is facing. Some banks offer retirement
account management for your employees as well as other employee benefits.
Disadvantages of banking
Commercial banking or business accounts are often more expensive than
traditional bank accounts. Banks may charge fees for night deposits, for processing
a certain number of checks and for the payroll services. Depending on the size of
your business, some of the services offered may not be needed, and you may still
be charged for the services even if you're not fully using them.
BANK ACCOUNT
A bank account is a financial account between a bank customer and a financial
institution. A bank account can be a deposit account, a credit card, or any other
type of account offered by a financial institution. The financial transactions which
have occurred within a given period of time on a bank account are reported to the
customer on a bank statement and the balance of the account at any point in time is
the financial position of the customer with the institution. a fund that a customer
has entrusted to a bank and from which the customer can make withdrawals.
 Types of Bank Accounts in India (Deposit Accounts)

Traditionally banks in India have four types of deposit accounts, namely Saving
Banking Accounts, Current Accounts, Recurring Deposits and, Fixed Deposits.
1. Saving Account –
Saving accounts are opened to encourage the people to save money and collect
their savings. The saving account holder is allowed to withdraw money from the
account as and when required. The interest on Saving Bank Accounts was fixed by
RBI and it was fixed at 4.00% on daily balance basis. RBI has deregulated Saving
Fund account interest rates and now banks are free to decide the same within
certain conditions imposed by RBI.
Features of Saving Accounts –

1. There is no restriction on the number and amount of deposits. However, in India,
mandatory PAN (Permanent Account Number) details are required to be furnished
for doing cash transactions exceeding Rs. 50,000.
2. Withdrawals are allowed subject to certain restrictions.
3. A minimum amount has to be kept on saving account to keep it functioning.
2. Current Account –
Current Accounts are basically meant for businessmen and are never used for the
purpose of investment or savings.
Features of Current Accounts –
(1) The main objective of Current Account holders in opening these account is
to enable them (mostly businessmen) to conduct their business transactions
smoothly.
(2) There are no restrictions on the number of times deposit in cash / cheque can
be made or the amount of such deposits;
(3) Usually banks do not pay any interest on such current accounts.
(4) The current accounts do not have any fixed maturity as these are on
continuous basis accounts.
(5) Cheque book facility is provided and the account holder can deposit all types
of the cheques and drafts in their name or endorsed in their favour by third parties.
3. Recurring Desposit Account –

Recurring Deposit is a special kind of Term Deposit offered by banks in India
popularly known as RD accounts which help people with regular incomes to
deposit a fixed amount every month into their Recurring Deposit account and earn
interest at the rate applicable to Fixed Deposits.
Features of RD Accounts –
1. Recurring Deposit accounts are normally allowed for maturities ranging
from 6 months to 120 months
2. These accounts can be opened in single or joint names. Nomination facility
is also available.
3. Rate of Interest offered is similar to that in Fixed Deposits.
4. Interest is compounded on quarterly basis in recurring deposits.
4. Fixed Deposit Account (FD) –

The account which is opened for a particular fixed period (time) by depositing
particular amount (money) is known as Fixed (Term) Deposit Account. The term
'fixed deposit' means that the deposit is fixed and is repayable only after a specific
period is over. Under fixed deposit account, money is deposited for a fixed period
say six months, one year, five years or even ten years. The money deposited in this
account cannot be withdrawn before the expiry of period.
Features of FD Accounts –
1. The main purpose of fixed deposit account is to enable the individuals to
earn a higher rate of interest on their surplus funds (extra money).
2. The amount can be deposited only once. For further such deposits, separate
accounts need to be opened.
3. Fixed Deposit Account may be opened for a minimum period of 15 days and
maximum period of 10 years.
4. The minimum amount required to open a Fixed Deposit is Rs.1000.
5. Withdrawals are not allowed. However, in case of emergency, banks allow
to close the
fixed account prior to maturity date. In such cases, the bank deducts 1% (deduction
percentage many vary) from the interest payable as on that date.
➢ ATMs: (Automated Teller Machine): The ATM debit cards, credit cards
and prepaid cards (that permit cash withdrawal) issued by banks can be used at
ATMs for various transactions.
➢ Use of ATMs of Other Banks:
i. 5 free transactions are permitted per month (inclusive of financial and/or

non-financial) at other bank ATMs for Savings Bank Account holders.
ii. For transaction beyond this minimum number of transactions, banks charge
maximum of Rs 20/ - per transaction.
iii. Reserve Bank of India reduced free usage of other bank automated teller
machines (ATMs) to 3 per month from 5 from November, in six metropolitan
cities - Delhi, Mumbai, Chennai, Bangalore, Kolkata and Hyderabad.
➢ Reconciliation of failed transactions at ATMs
i. The time limit for resolution of customer complaints by the issuing banks
shall stand reduced from 12 working days to 7 working days from the date of
receipt of customer complaint.
ii. Accordingly, failure to recredit the customer’s account within 7 working
days of receipt of the complaint shall entail payment of compensation to the
customer @ Rs. 100/- per day by the issuing bank..
iii. Any customer is entitled to receive such compensation for delay, only if a
claim is lodged with the issuing bank within 30 days of the date of the transaction.
iv. All disputes regarding ATM failed transactions shall be settled by the
issuing bank and the acquiring bank through the ATM system provider only.
➢ WHITE Label ATMs:

ATMs which are owned and operated by non-banking companies are called White
Label ATMs. Note: RBI authorised four entities to operate as WLAs namely Tata
Communications Payment Solutions, Prizm Payment Services Pvt. Ltd, Muthoot
Finance Limited and Vakrangee Ltd.
➢ Personal Identification Number (PIN) :

A Personal Identification Number is a secret numeric password shared between
user and a system that can be use to authenticate the user to the system.
Fixed Deposit Interest Rates offered by three Banks in India

Listed in the table below are the interest rates (p.a) offered by three banks for the
duration of 7 days to 10 years.
Name of Bank For General Citizens For Senior Citizens
State Bank of India 3.50% – 5.70% 4.00% - 6.20%
Bank of India 4.00% - 5.80% 4.50% - 6.30%
ICICI Bank 3.50% - 6.00% 4.00% - 6.50%

Recurring Deposit Interest Rates offered by three Banks in India
Listed in the table below are the interest rates (p.a) offered by three banks for
the duration of 6 months to 10 years.
Name of Bank For General Citizens For Senior Citizens
State Bank of India 5.50% – 5.90% 6.25% - 6.40%
Bank of India 6.25% - 6.70% 6.75% - 7.20%
ICICI Bank 4.75% - 6.00% 5.25% - 6.50%

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BANK

A bank is a financial institution and a financial intermediary that

 Types of Bank Accounts in India (Deposit Accounts)

Features of Saving Accounts –

Features of Current Accounts –

3. Recurring Desposit Account –

4. Fixed Deposit Account (FD) –

➢ Use of ATMs of Other Banks:

i. 5 free transactions are permitted per month (inclusive of financial and/or

➢ Reconciliation of failed transactions at ATMs

➢ WHITE Label ATMs:

➢ Personal Identification Number (PIN) :

Fixed Deposit Interest Rates offered by three Banks in India

Name of Bank For General Citizens For Senior Citizens

State Bank of India 3.50% – 5.70% 4.00% - 6.20%

Bank of India 4.00% - 5.80% 4.50% - 6.30%

ICICI Bank 3.50% - 6.00% 4.00% - 6.50%

State Bank of India 5.50% – 5.90% 6.25% - 6.40%

Bank of India 6.25% - 6.70% 6.75% - 7.20%

ICICI Bank 4.75% - 6.00% 5.25% - 6.50%

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