Banks cater to everyone, right from individuals to business owners and corporations. Accordingly, the Indian banking system offers various types of bank accounts. So, let us look at the six types of bank accounts in India.
6 Types of Bank Accounts in India
1. Savings Account
A savings account is a regular deposit account wherein you earn minimum interest. It has a limit on the number of monthly transactions. Banks offer savings accounts for children, senior citizens, women, families, etc. There exist zero-balance accounts and others with advanced features that include bill payments, debit cards, auto sweep, etc.
2. Current Account
This is an account type for entrepreneurs, business owners, and traders. It holds more liquid deposits, facilitates a higher number and frequency of transactions, and does not impose a limit on daily transactions. Additionally, it provides an overdraft facility that allows the account holder to withdraw more money than what is currently there in the account. However, a current account is a zero-interest account and requires maintaining a minimum balance.
3. Fixed Deposit Account
A fixed deposit account, more popularly known as FD, allows you to deposit a lump sum amount in the account and offers a particular interest on it, depending on the tenure (which could be as less as seven days to ten years) for which it is kept. Some banks also offer a higher rate of interest for senior citizens or women on the amount deposited.
Depositing money in a fixed deposit refers to locking that amount for the said tenure. Although yes, the online banking facility of many banks allows premature closure of the FD, along with interest accumulated until then. Besides, online banking has also expedited the process of opening an FD. You can now open an FD in a few minutes.
4. Recurring Deposit Account
Recurring deposit, also termed RD, is another type of popular, conventional account that requires you to pay a certain fixed amount monthly or quarterly on a recurring basis for six months to up to ten years, based on the tenure you’ve chosen. This type of account also offers a particular interest towards the end of the tenure to the account holder.
However, an RD does not allow you to change the tenure or the recurring amount. Besides, some banks allow premature closure of an RD, but with a penalty in the form of a lower interest rate.
5. Salary Account
As the name suggests, a salary account is the one you open based on your association with your employer and receive your salary every month. As an employee of a company, you can choose the type of salary, depending on the features you want. Aside from salary, you also receive reimbursements in the salary account.
6. NRI Account
Now, what about Indians who reside abroad? For such people, banks offer an NRI account. The various types of NRI account that banks offer include,
- Non-Resident Ordinary (NRO):
This is a rupee account, wherein the NRI deposits money in the account in foreign currency, and it is converted in rupee. The NRI can keep the money earned overseas in this account.
- Non-Resident External (NRE):
Similar to NRO, NRE also maintains funds in rupees. However, this account is only to deposit money earned overseas.
- Foreign Currency Non-Resident (FCNR):
An FCNR account is maintained in foreign currency. It allows the NRI to transfer the principal and interest from the account. However, the interest is not taxed in India.
We hope this blog gave adequate insights into the various bank account types in India. For more of such financial literacy content, keep visiting and stay tuned with Arth Shikshan.