Types of Banking Account, Features and Benefits of Bank Accounts

Types Of Banking Account: Bank Account is a type of account in which a person can deposit and withdraw money or funds as per their needs. It is a financial account that is maintained and controlled by a bank and keeps a record of the transactions between the customer and the bank. Understanding the types of banking accounts in India is a very important topic in the general banking awareness syllabus for most of the competitive exams. In this article, we will talk about the types of Banking Accounts in India.

Types of Banking Account

There are many types of Banking Account in India that serve different services and financial needs like checking accounts, transactions, bill payments, money market accounts etc. In this article we will talk about different types of Banking Account in India in detail.

1. Savings Account

A Savings Account is a type of Bank Account that can be opened by either an individual or jointly. It is a regular deposit account where you earn a minimum rate of interest. For opening a savings account an individual should hold an Aadhar Card and a Pan Card which are mandatory documents for opening a savings account. 

Key Features of Savings Account

• Account holders can deposit money as many as they want.
• Savings Account provide a range of rate of interest from 2.5% to 6% to their customers. 
• There is no need of minimum balance in the account
• In this account you have the option of Internet Bank Service.
• This type of account is suitable for students, housewives, pensioners etc.

2. Current Account

It is a type of Account which is basically for businessmen where money can be transferred frequently between financial accounts. This type of account is suitable for transactions by corporations and businesses.

Key Features of Current Account

• These types of accounts are mostly used for business transactions.
• There is no limit to how much money can be put in the account.
• Current Account do not have any transaction limit.
• Current Account Holders do not earn any interest like Savings Account Holders.
• Internet Banking Service is available.
• In some current bank accounts you have a facility of foreign transactions.

3. Recurring Deposit Account

In this type of account there is a special kind of Term Deposit offered by banks which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the desired rate of interest. Recurring Deposit accounts are normally allowed for maturities ranging from 6 months to 120 months.

Key features of Recurring Deposit Account

• The minimum limit to open this type of account differs from bank to bank.
• This type of account offers a deposit plan whose goal is to encourage the people to save money.
• There is a risk in early withdrawals.
• Account holders can close their bank accounts before the account’s maturity date.
• The accounts can be opened from 6 months to 120 months.
• One should not make a premature withdrawal of the money because the bank can deduct a sum of the amount as penalty.

4. Fixed Deposit Account

This type of account is opened for a particular fixed time period by depositing a particular amount is known as Fixed Deposit Account. Fixed Deposit Account may be opened for a minimum period of 7 days and maximum period of 10 years.

Key features of Fixed Deposit Account

• Allows you to earn a fixed rate of interest on a certain amount of money which is kept in bank for a given period of time.
• There is a one time deposit and take away account.
• Rate of interest depends on the investor and maturity period.
• Interest rate varies bank to bank.
• Banks also offer tax-free fixed deposit accounts.

5. Foreign currency Non-Resident (FCNR)

Foreign Currency Non-Resident Accounts have to be opened and maintained in foreign currency. Your principal amount and the interest in an FCNR Account are fully repatriable, i.e., transferable. Interest income earned on your money in an FCNR account is non-taxable in India.

Key features of Foreign Currency Non-Resident Accounts

• There is no limit on keeping money in the account.
• This type of accounts bear the impact of a change in the rate of conversion.
• NRIs can invest.
• It earns tax-free interest in India.
• The deposits have a one to five-year tenure.
• One can do an early withdrawal with a penalty.

6. Non-Resident External Rupee Account (NRE)

NRE Accounts are maintained in Indian Rupees (INR). This means that when you deposit the money in the NRE Account, the foreign currency is converted to Indian rupees at the prevailing foreign exchange rates. It is mainly used to house your savings from income that you have earned abroad. The principal amount, as well as the interest, are fully repatriable, i.e., transferable. The interest income earned on the amount in an NRE account is non-taxable in India. You can have other NRIs or Resident Indian (who is a close relative as per Companies Act 2013) as joint account holders in NRE Accounts.

Key features of Non-Resident External Rupee Account (NRE)

• In this type of account, NRIs can deposit their earnings in India.
• It is taxable in the home country.
• One should meet with the eligibility to open this account.
• Account holders can access the account by using an International Debit Card and Internet Banking.
• Any amount of balance can be maintained.

7. Non-Resident Ordinary Rupee Account (NRO): 

NRO Accounts are maintained in INR. It is used to house funds from your income that you have earned from India or abroad. Income like rent, dividend, pension, etc. can be sent abroad through the NRO Account. Interest income earned on the amount in an NRO Account is liable for TDS or Tax Deductible at Source. You can have other NRIs or Resident Indians as joint account holders in NRO accounts.

Key features of Non-Resident Ordinary Rupee Account (NRO)

• Account holders can invest the money in India.
• NRIs can open the account individually or with other NRIs and Indian residents.
• One cannot transfer from NRO to NRE funds.
• No limit to how much money can be put in the account.
• These accounts hold deposits in Indian Rupee.

8. Salary Account

This type of account is opened for the employees from big firms, corporations, and businesses for the purpose of smooth transactions of salary from employers to employees. 

Key features of Salary Account

• Direct credit of monthly salary by employers to employees’ accounts.
• This type of account does not need any minimum balance requirement.
• One can get a credit and debit card.
• These accounts can be converted to savings accounts as per customer requirement.
• Banks have rights to convert these accounts to savings accounts due to inactivity for more than three months.

In this article we have discussed different Types of Banking Account which are available in India. So, go through the article very carefully. It is very important to understand it from a Banking Awareness point of view. 

Types of Banking Account FAQs

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