TYPES OF ACCOUNTS
Savings Account
- It is especially for individuals and sometimes for small businesses.
- It creates the savings habits in the people.
- All Resident Indians above 18 years age can open saving account. For 10 to 18 years age group account is allowed with some restrictions and for persons below 10 years (minor account) with guardian is to be opened.
- Saving Accounts Interest rates vary from 2.5% to 6% for most of the banks.
- Regular monthly payments through ECS are allowed for payment of any loans availed (ECS= Electronic Clearing Service).
- One has to maintain minimum balance which varies from bank to bank and locality of the bank branch.
Current Account
- Current account is mainly opened by firms and companies basically meant for business purpose.
- Normally firms / companies / trusts / association of persons can open.
- Banks don’t pay any interest in current account. However, Banks take some service charges in such account.
- Savings and current Accounts are called demand deposits.
- CASA Ratio: It is the ratio of the deposits in the form of current and savings accounts to the total deposits. CASA Ratio should be more than 40% for banks.
Inactive /Dormant Account
- If a customer has a current or a savings bank account and has not done any transactions through it for more than 12 months, then it will be classified as an inactive account. And if transaction is not done for 24 months, then it will be classified as dormant Account.
Fixed Deposit
- Account can be opened for a period ranging from 7 days to 10 years. Interest rate varies from bank to bank and fixed period of the deposit. Premature closure may allow but attract penalty for the same.
- Loan against the fixed deposit is available up to 90% of the outstanding amount.
- Tax Deduction at Source (TDS) will be applicable if the interest income is more than Rs.40,000/- in a financial year. Once the tax is deducted, banks will give form no. 16 A to the depositor to show in their IT returns. If the depositor does not come in to the bracket of Income Tax purview, he can deposit form no. 15G or 15H (for senior citizens) so as to avoid ‘TDS’ by bank.
Recurring Deposit
- Recurring deposit does not allow to fixed the cumulative amount once but for monthly deposit with the bank for an agreed period just like fixed deposit and maximum period is normally 120 months (10 years). Interest is credited on the accumulated balance at regular intervals.
- These are designed to induce small savers to save some money regularly.
No-Frill Account & BSBDA Account
- It is a zero-balance account and generally no other facilities are available.
- On August 2012, all the ‘No-Frills’ accounts converted to Basic Savings Bank Deposit Accounts (BSBDA).
- BSBDA Account provides ATM cum debit card at free of cost. No limit on the number of times for depositing the amounts, but only four withdrawals per month at branch or at ATMs. Banks can levy the charge if more than the above facilities are required.
PMJDY Account (Pradhan Mantri Jandhan Yojana)
- No minimum balance required.
- Accidental insurance covers of Rs.1,00000/- to all the account holders. Life Insurance cover of Rs.30,000/- to all the account holders (applicable for the accounts opened up to 26th January 2015).
- After satisfactory operation of the account for 6 months, overdraft facility of Rs.10,000/- to one member of the family (Preferably, the lady of the household) is granted.
- Rupay debit card at free of cost.
- Age Limit- 18 to 65 years.
- Small account: When the customer is not able to satisfy KYC norms. This account has got several restrictions. Aggregate of all deposits shall not exceed Rs.1 lakh per annum. Aggregate of all withdrawals and transfers in a month shall not exceed Rs.10,000/-. Maximum balance at any point of time shall not exceed Rs.50,000/-.
What is Nomination facility?
- Nominee means “A person who is proposed or formally entered as the recipient of a grant or award” in case of death of the depositor(s).
- Nomination facility is normally available for Savings, Fixed and Recurring deposit accounts.
- Banking Companies (Nomination) rules 1985 permit banks to pay dues to nominee in the event of death of depositor(s) Without asking for succession certificate or without verifying claims of legal heirs.
Some Other Accounts
Nostro Account: These accounts are held by Indian Banks in foreign Banks in foreign currency. For example, SBI has an account in Bank of America in dollar currency.
Vostro Account: These accounts are held by foreign banks in India in Indian currency. For example, Bank of America has an account in Indian Bank in Indian Rupees.
DEMAT Account: DEMAT stands for Dematerialised Accounts. These accounts are used to transact shares in electronic format.
Escrow Account: It is the temporary pass through an account held by third parties during the transaction between two parties.
GILT Account: These accounts are maintained by investors with the primary dealers for holding their government securities and Treasury bills in the Demat form.
See also…
DIFFERENCE BETWEEN NRE & NRO ACCOUNT