Types of Bank Accounts

A bank account is the type of account that allows you to save, invest, and increase your cash. All accounts have different characteristics and specific requirements, from the facilities provided to the maintenance of the balance. Customers can choose from a variety of accounts to meet their particular needs. Many types of bank accounts are available in India, and we’ll go through them in detail.

Six Different Types of Bank Accounts in India

Savings account

Individuals or jointly two individuals can open a savings account. Savings accounts pay interest on deposits. Savings account features are:

• Depositors receive annual interest rates ranging from 2.5% to 6% on their savings

• You can deposit money as many times as you want. Due to the high liquidity of savings accounts, daily withdrawal limits apply

• Different banks have different minimum balance requirements. You can also open accounts at zero balance

• You will get chequebooks, debit cards, and passbooks. Customers can use mobile and internet banking

• Auto-debits can be set up for paying bills or investing in various securities, such as mutual funds and can also set up auto credit for dividends and interests

• In India, anyone can open a savings account, even minors

Current Bank Account

If you’re running a small business that does many daily transactions, you need a current account. An account with a current bank earns no interest and requires a high minimum balance. Features of a current bank account are:

• No transaction limit and the account also offers more frequent transactions

• The minimum balance for current accounts is higher

• There is a current account available to all businesses, regardless of whether they are a partnership firm or a sole proprietorship

• Banks offer current account holders the option of an overdraft; however, the banks will set the terms for the overdraft facility

• You will get cheque books, mobile and internet banking facilities

• Few current bank accounts allow foreign currency transactions

Salary Account

According to the employer and bank agreement, you must open a salary account. Your employer deposits your salary each month in the salary account. Features of the salary account are:

• Salary accounts deposits earn interest, and it varies by bank

• Salary accounts have no minimum balance requirements

• Banks provide debit and credit cards

• There are also lower rates for IMPS, NEFT, and RTGS

• Customers can also check their account balances via the internet and mobile banking

• Overdrafts facility is also available from a few banks

• Simplifies bill-paying

• Home and personal loans are also lower for salary account holders

Recurring Deposit Account

Customers of private and public banks can open recurring deposit accounts. An investor can set up an RD account and deposit a predetermined amount at a predetermined date to earn interest on maturity. The investor can quickly build a corpus because the investment is in instalments. With the compounding power, you can earn more money over time. Recurring deposit accounts have the following features:

• A recurring deposit plan aims to encourage people to save money regularly

• As per the bank, the minimum deposit amount varies greatly, one can start with Rs. 1000

• Six months is the minimum, and the maximum deposit time is ten years

• Similar interest rate as Fixed Deposit, but higher interest rate than a Savings account

• Too-early withdrawals are risky

• You can close your bank account before the account’s maturity date

Fixed Deposit Account

A fixed deposit is a popular investment option for investors who want to keep their money in a safe place for a predetermined period and at a predetermined interest rate. All Indian banks, public and private, provide fixed deposit options. An FD account has the following features.

• Open an FD account online or in a branch near you

• Investing in a fixed deposit has become straightforward

• The interest rate depends on the investor and the maturity period

• A senior’s interest rate is 0.50%-1% higher than other individuals

• The interest rate varies by bank

• Banks also offer tax-free fixed deposit accounts

• Tax-saving fixed deposit accounts have a 5-year lock-in period

NRI Bank Accounts

Banks provide NRI accounts for people who are not citizens of India. NRIs and residents have different bank accounts. Types of NRI accounts are:

Non-Resident Ordinary (NRO) Savings Accounts

An NRO savings account helps NRIs manage their income in India. It can be interest, rent, or dividends. Only Indian currency deposits in the account are possible in this account. An NRO account has the following features:

• The rupee-denominated account must make all deposits in rupees; also, it requires a higher minimum deposit

• NRIs can open accounts individually or with other NRI or Indian residents

• You cannot repatriate the NRO savings account’s funds

• You cannot transfer NRO to NRE funds

• They can invest the money in India

• This account allows nominations; additionally, it may make payments from NRI from the NRO account

• If the account holder’s residency status changes, he can convert it to an NRO account

• If he returns to India and changes their residency status, he can convert to a regular savings account

• The interest repatriates on these accounts, and India’s interest is taxable

Non-Resident External Account (NRE)

With this account, NRIs can deposit their money in India. NRE savings account features are:

• With this account, NRIs can deposit their earnings in India 

• NRIs can individually or jointly open this account

• It is a very liquid account and can fully repatriate all funds 

• In India, interest on deposits is entirely tax-free

• In the home country, it is taxable

• You can access this account using an international debit card and internet banking

• It also allows you to invest in Indian investments and mutual funds

• Eligible investors can only open this account

• NRIs, or Indian citizens studying, working, or doing business abroad, can open this account

Foreign Currency Non-Residential Account (FCNR)

It is a foreign currency term deposit account, and to open this account, you must select one currency among nine currencies permitted by the RBI. The FCNR account has the following features:

• It is a term deposit account where NRIs can invest

• An NRE account in FCNR account transfer is also possible

• NRIs can only deposit in one of nine currencies

• Investors must also deposit funds in the NRI’s home currency

• Interest rates on this account vary by currency and bank

• Also, banks only pay interest after a deposit of a year

• It also earns tax-free interest in India

• The deposits have a one to five-year tenure

• Banks allow early withdrawals with a penalty

• Only foreign currency withdrawals and banks also allow overdrafts on the deposits

• However, the loan terms vary by bank

• Principal and interest are entirely repatriable

Conclusion

Due to the ever-changing banking industry, you can now access your bank accounts anytime, from any location. A visit to the bank isn’t necessary when you have options like mobile and internet banking and UPI payments. Instant mini statements, cash transfers, and bill payments are available today.