What is KYC? 7 Frequently Asked Questions About KYC

What is KYC? 7 Frequently Asked Questions About KYC

Modern-age banking and investment avenues have significantly developed with time, and accordingly, their rules and regulations and their requirements also have evolved. One of them is KYC!

You must have come across the term KYC quite a lot of times, haven’t you? But then, what do you mean by KYC? Why do banks do KYC? What are the various documents banks require to complete KYC, and what are the different KYC processes? Let us look at the answers to these questions through this blog.

1. What do you mean by KYC?

Know Your Customer, popularly known as KYC, in simple words, is a process followed by banks and other financial institutions to verify the identity and address of customers who do financial transactions with them. The process is mandatory for every financial institution and made compulsory by the Reserve Bank of India. KYC is imperative for account opening, mutual fund investments, loan applications, applying for a credit card, investing in FDs, RDs, etc.

2. What are the documents required to do KYC while opening a bank account?

While opening a bank account, you must submit PAN as ID and address proof and Aadhar number/ enrolment number, along with a recent photograph.

3. What are the KYC documents for address proof?

  • Electricity bill (not more than three months old)
  • Telephone bill (not more than three months old)
  • Water bill (not more than three months old)
  • Passport
  • Driving license
  • Voter’s card
  • Valid rent agreement
  • Valid identity cards with address printed and issued by colleges affiliated to ICAI, ICWAI, ICSI, Bar Council, etc. can also be considered as address proof for KYC

4. What are the documents for identity proof?

  • Voter ID card
  • Passport
  • UID that comes with the Aadhar card
  • PAN card with photograph
  • Documents with a photo of the document holder, issued by State, or Central Government, regulatory bodies, etc.
  • Valid identity cards issued by colleges affiliated to ICAI, ICWAI, ICSI, Bar Council, etc. can also be considered as address proof for KYC
  • A valid credit or debit card with the individual’s name and address

5. What are the different types of KYC verification?

The two types of KYC verification – Aadhar-based KYC and in-person KYC. Let us look at both these types of KYC verifications.

Aadhar-Based KYC

Aadhar-based KYC can be done online. So, if you have an internet connection, you can do Aadhar-based KYC. However, you need to scan and upload a copy of your original Aadhar card to do the process.

Let us consider the example of mutual fund investments. If you want to invest in a particular mutual fund and opt for an Aadhar-based KYC, you can only invest INR 50,000 annually. However, if you’re going to invest more, you need to do an in-person KYC verification.

In-Person KYC Verification

As the name suggests, in-person KYC verification is done offline, i.e., in-person. To complete the in-person KYC verification process, you need to visit a KYC kiosk or the bank and authenticate your identity through Aadhar biometrics. Nevertheless, if it isn’t possible for you to see the bank in person, you can call the bank representative or the third-party vendor to send its KYC executive to your home or office and get the KYC done.

These days, and especially given the pandemic, banks or financial institutions complete KYC through video call, wherein you are required to show your Aadhar card and other documents as requested.

6. Are you required to do periodic KYC even after you’ve done it?

Yes. Banks are required to update their KYC records periodically. There are two reasons for it. First, it is a part of their measures to prevent fraud concerning customer accounts, and secondly, it forms a part of their ongoing due diligence on bank accounts. The period after which the bank may call or connect with you to update your KYC records varies based on the type of account and factors such as the bank’s risk perception. However, yes, the bank may connect with you after a specific period to update their KYC records.

7. Is it necessary to complete the KYC process for every account that you open in a bank?

No. KYC is required only for the first time when you open a KYC-compliant account in a bank. You wouldn’t need to submit the same documents while opening a new account in the same bank.

KYC is an essential process that helps banks and financial institutions verify the identity of their customers. It is a process that’s important from the banks’ security perspective and thus avoids security concerns such as fraud, fake identity, etc. We hope this blog was helpful enough to help you know about KYC. For more updates, keep following Arth Shikshan.

What is PAN Card? Benefits of PAN Card

What is PAN Card? Benefits of PAN Card

Permanent Account Number, popularly known as PAN, is an electronic system through which the information concerning the tax of a particular person or a company is recorded against a single PAN. PAN is unique, and hence, no two tax-paying individuals, companies, or entities can have a single PAN. Let us now look at a few questions concerning the benefits of a PAN card, the application process of PAN, documents required to apply for a PAN, etc.

1. What are the different types of PAN?

The various types of PAN include,

  • IndividualIndividual
  • Company
  • Trusts
  • Society
  • HUF- Hindu Undivided Family
  • Foreigners
  • Partnerships/ Firms

2. Who issues a PAN?

It is the Income Tax Department, Government of India that issues a PAN.

3. Is a PAN lifetime?

Yes, a PAN’s validity is lifetime.

4. What are the different documents required to apply for a PAN card?

To apply for a PAN, you need to submit two types of documents – Proof of Address (POA), and Proof of Identity (POI).

Individual POA/ POI – Passport, voter ID, driving license, Aadhaar
Trust Copy of Trust Deed or that of the Certificate of Registration Number issued by a Charity Commissioner
Company (Registered in India) Registrar of Companies-issued Certification of Registration
Hindu Undivided Family HUF affidavit by the HUF head and the details of POA and POI
Society Certificate of Registration Number from Registrar of Co-operative Society or Charity Commissioner
Firms/ Partnerships (LLP) Certificate of Registration issued by the Registrar of Firms/ Limited Liability Partnerships and Partnership Deed.

Apart from the above, foreigners also can apply for a PAN card. To do so, they need to submit passport PIO/ OCI issued by the Indian Government, bank statement of the country of residence, and a copy of the NRE bank statement in India.

5. How to apply for a PAN?

You can apply for a PAN through either the online or the offline process. Let us look at how to apply for a PAN online and also the step-by-step process to apply for PAN offline.

Online PAN Application Process

  • Go to the website of NSDL or UTIITSL
  • Fill in the required form with your details furnished in it
  • Submit the necessary documents and pay the processing fee
  • After the completion of the process, the authorities will send the PAN to the given address

Offline PAN Application Process

  • Visit the authorized PAN center and the get the PAN application form
  • Fill in the application form
  • Attach the required documents
  • Submit the form, along with the processing fee
  • After the completion of the process, the authorities will send the PAN to the address you’ve given

6. How much does it cost to apply for a PAN?

The charges for applying for a PAN are INR 93 + GST. So the total cost is INR 110 for an Indian communication address.

7. How to reapply for a PAN in the case of a lost PAN card?

Lost your PAN card, now, what to do? Well, if that happens, do not panic or get hassled. You can apply for a duplicate PAN card online or offline. Follow almost the same process that you did when applying for the PAN card in the first place. Go to the NSDL or UTIITSL website, fill the form 49-A if you are an Indian citizen, or 49-AA if you are a foreigner, pay online for the duplicate PAN card copy. The authorities will dispatch your PAN card within 45 days.

8. Why do you need a PAN card?

Having a PAN simplifies and expedites a lot of essential processes. Accordingly, some of the benefits of a PAN card include,

  • Proof of AddressProof of Address
  • Proof of Identity
  • Business registration
  • Tax filing
  • Get a phone connection
  • Apply for a gas connection
  • Open a Demat account
  • Invest in mutual funds
  • To be eligible to open and operate bank accounts
  • Do financial transactions
  • To claim tax refund

Applying for a PAN card benefits you in several ways. In a way, it establishes your credibility and signifies that you are a responsible citizen of India. So, if you do not already have a PAN card, you must apply for one and get it to be eligible for the above benefits. Keep following us for more on financial literacy.


New Bank Transfer Methods (NEFT, RTGS, and IMPS)

New Bank Transfer Methods (NEFT, RTGS, and IMPS)

As a digital-age banking customer, you must have come across the terms NEFT, RTGS, and IMPS. Of course, all these are associated with online funds transfer. However, have you ever wondered what these terms individually mean, the advantages and disadvantages of each one, how they are different from each other, and how to use them? If you haven’t already, this blog from Arth Shikshan answers it before you do.


What is NEFT?

Introduced by RBI, NEFT stands for National Electronic Funds Transfer. It enables quick money transfer anywhere across India. However, to facilitate fund transfer through NEFT, the branches of the banks involved must be NEFT-enabled. Let us now look at some of the pros and cons of NEFT.

Advantages and Disadvantages of NEFT

Advantages of NEFT

  • Near real-time funds transfer
  • Secure funds settlement
  • Positive credit confirmation to beneficiary account to the remitter through email/ SMS
  • Available throughout the year, 24/7, and seven days a week

Disadvantages of NEFT

  • The method is secure, but as an online fund transfer system, data remains vulnerable to hacking.
  • People unaware of online transfer systems may be unable to transfer funds through NEFT

How to use NEFT for online funds transfer?

Let us now see how to do NEFT transfer in ten simple steps.

1. Sign-in into the internet banking page of your bank1. Sign-in into the internet banking page of your bank

2. On the home screen, click on the Fund Transfer option

3. Select the NEFT option

4. Select the proper beneficiary from the list

5. If the beneficiary isn’t already added, click on the Add Beneficiary button.

6. Enter the required details of the beneficiary, verify them, and confirm

7. You receive a four-digit OTP on your registered mobile number to confirm the addition of the new beneficiary

8. Wait until the beneficiary is added to the account

9. Now, choose the beneficiary and select the bank account from which the money will be transferred\

10. Enter the right amount and click on the Confirm button to initiate the NEFT transfer


What is RTGS?

Launched in 2004 by the RBI, RTGS is the short form of Real-Time Gross Settlement. Real-time enables continuous real-time fund transfers, which refers to processing instructions at the moment the bank receives them. On the other hand, gross settlement refers to handling fund transfer instructions on an instruction by instruction basis.

Advantages and Disadvantages of RTGS

Advantages of RTGS

  • No maximum limit for RTGS transfers
  • All-day availability of funds transfer
  • Enablement of a real-time fund transfer through the bank branch
  • Elimination of the need to issue a demand draft or a physical cheque
  • No fee or charges for the transfer
  • Money can be transferred anytime and from anywhere

Disadvantages of RTGS

  • The minimum amount to do RTGS is INR 2 lac with no upper limit
  • It does not allow to track the transaction to its customers

How to do an RTGS transfer?

Let us look at the steps to do RTGS transfer online.

1. Sign in to the internet banking of your bank

2. On the home page of the website, click on Fund Transfer

3. Select the beneficiary option

4. Choose the RTGS option from the inter-bank payment options available

5. Add a beneficiary while providing the required details

6. Click on Accept Terms and Conditions and confirm

7. You will receive a high-security password to your mobile number

8. Enter the password to authorize the beneficiary

9. The beneficiary addition takes around 30 minutes to a few hours

10. Once the beneficiary is added, go to Fund Transfer/ Payment Transfer tab and click on RTGS

11. Enter the required amount and select the appropriate beneficiary

12. Click on Accept Terms and Conditions and confirm to process the transfer


What is IMPS?

IMPS is the short form of Immediate Payment Service. It was introduced by the RBI and the NPCI and initiated by the latter in 2010 through a pilot project with four major banks. However, over the years, it has grown to be used by over 150 banks throughout the country. It enables instant funds to transfer through laptop and mobile and is available at all times. Banks charge a nominal fee for IMPS transfers.

Advantages and Disadvantages of IMPS Transfer

Advantages of IMPS Transfer

  • vailable 24/7
  • Instant funds transfer
  • IMPS transfer is available online
  • Availability of intrabank and interbank transfer
  • No minimum amount on transfer
  • Transfer is available SMS, mobile, net banking, ATM, etc.

Disadvantages of IMPS Transfer

  • There’s a limit on the maximum transaction

How to do an IMPS transfer?

Here a step-by-step process of IMPS transfer.

1. Log in to your bank’s net banking portal or website.

2. Go to the Funds Transfer option.

3. Enter the recipient’s MMID and mobile number. However, you can also enter the account number of Aadhar or the IFSC number.

4. Enter the transfer amount

5. Enter your PIN to authenticate the transfer request

6. You and the recipient receive SMS confirmation on the successful transfer of the funds.

Online banking has revolutionized banking, and RTGS, IMPS, and NEFT have played an instrumental role in transforming banking in terms of pace and convenience. Arth Shikshan hopes you got enough basic information about NEFT, RTGS, and IMPS through this blog. Keep following this space for more insights on financial literacy.

Introduction to Banking – What are Banks, Bank Types, Facilities, and Online Banking

Introduction to Banking – What are Banks, Bank Types, Facilities, and Online Banking

Banking isn’t new to India. It has been a part of the country’s economic ecosystem for over 200 years. It is also one of the sectors that have evolved significantly over the years and have always walked hand-in-hand with time.

Banking now forms an integral part of our lifestyle and our financial habits. It is because we trust banks a lot. However, we have many people, yet unaware of banking basics, such as what banks are, the types of banks, the various nationalized, private banks, etc. Arth Shikshan, through this blog that talks about a few such essential aspects of banking in India. We hope, the blog adds to the banking knowledge of people.

What is a bank?

A bank is a financial institution authorized and licensed to receive deposits, store them, enable its customers to withdraw money whenever required, and loan money. Additionally, banks also provide other financial services such as wealth management, lockers, currency exchange, etc. In India, the country’s banking system is regulated by the Reserve Bank of India (RBI), which is India’s central and regulatory body.

What are the different types of banks in India?

In India, banks are classified as the following.

Commercial Banks

In India, commercial banks are regulated by the Banking Regulation Act, 1949. These banks aim to earn profits. Fundamentally, they accept deposits and give loans to corporates, the government, and the general public. Commercial banks include public sector banks, private sector banks, foreign banks, and regional rural banks. 

Small Finance Banks

As the name suggests, small finance banks aim to provide finance to micro industries, marginal farmers, and a lot of small businesses, and the unorganized sector. These banks are licensed under Section 22 of the Banking Regulation Act, 1949, and are governed by the provision of the RBI Act, 1934, and FEMA. Small finance banks support small businesses, and hence, contribute significantly to the Indian economy.

Cooperative Banks

Banks registered under the Cooperatives Act, 1912 and run by an elected managing committee are called cooperative banks. These banks work on a no-profit no-loss basis, and their target segment mainly includes small businesses, entrepreneurs, industries, and self-employed people across cities. Cooperative banks also cater to the rural parts of India. Their customers across this segment include people involved in activities such as farming, hatcheries, etc. 

Payments Banks

Payments bank is a relatively new segment across the banking cosmos of India and was conceptualized by the RBI. Currently, payments banks have a deposit limited to INR 1 lakh per customer. These banks offer various other services that include net banking, mobile banking, ATM cards, and debit cards.

Nationalized, Private Sector, Foreign Banks, and Small Finance Banks in India

urther to the classification of banks, let us now look at a few banks that fall under the categories we look earlier.

Nationalized Banks:

Bank of India, State Bank of India, Bank of Maharashtra, Indian Bank, Union Bank of India, Central Bank of India, Indian Overseas Bank, Bank of Baroda, Punjab National Bank, Canara Bank, and Punjab and Sindh Bank, and UCO Bank

Private Sector Banks:

HDFC Bank, ICICI Bank, IDFC Bank, IDBI Bank, Bandhan Bank, Axis Bank, Karur Vysya Bank, Karnataka Bank, Jammu, and Kashmir Bank, IndusInd Bank, Federal Bank, etc.

Foreign Banks:

BNP Paribas, HSBC Bank, Qatar National Bank (QPSC), Bank of America, JP Morgan Chase Bank NA, Credit Agricole Corporate & Investment Bank, Deutsche Bank, and many others.

Small Finance Banks:

Capital Small Finance Bank Ltd., Jana Small Finance Bank Ltd., Utkarsh Small Finance Bank Ltd., Equitas Small Finance Bank Ltd., Equitas Small Finance Bank Ltd., and others.

Facilities Provided by Banks in India

Banks provide an extensive range of facilities to their customers to simplify banking and enhance the banking experience. Let us quickly run through the five most significant ones.

1. Banker’s Cheque

A banker’s cheque is a pay order that a bank itself issues by withdrawing the required amount from the payer’s account. It also forms one of the methods of sending money by a bank. The banker issues a cheque in the name of the person or company to whom the customer wants to pay. Customers pay commission to the bank for this service. This facility is used to make local payments.

2. NEFT (National Electronic Funds Transfer)

NEFT is a modern-day electronic funds transfer system that involves online funds transfer from one bank to the other. NEFT does not have any minimum or maximum fund transfer limit. This facility is usually used by people who have bank accounts. However, it can be availed even by people who do not have an account. In the latter case, an individual can deposit cash at the NEFT-enabled branch and issue instructions to transfer funds through NEFT.

3. Bank Draft

Through the bank draft facility, customers, precisely account holders, can send money to other places. It requires account holders to fill a particular proforma with details as requested by the bank. 

The bank issues a draft to the customer after it debits his account with the required amount. Further, the customer sends the draft to the person he is about to pay the money to. The draft recipient deposits the draft with his bank, and the bank credits the amount to his account. The bank intimates the branch, wherein the draft is payable. However, the bank draft is quite a time-consuming process and involves a considerable amount of fees.

4. Cash-Credit

Cash credit is another significant facility wherein a bank loans money based on a customer on his current assets, fixed assets, etc. While giving loans on assets, banks hypothecate them in the banker’s favor.

5. RTGS (Real Time Gross Settlement)

RTGS refers to funds transfer on a real-time and gross basis. In RTGS, there’s no waiting period for the transaction. The system settles the transaction as soon as it is processed. Further, gross settlement refers to settling the transaction on a one-to-one basis without netting or bunching it with any other transaction. But one must note that RTGS payments are final and irrevocable, and take place, and maintained, or controlled by the country’s central bank.

What is online baking?

Online banking is the newest form of banking. It involves customers conducting banking transactions through electronic mediums. It is a one-click banking facility that allows customers to transfer funds, pay bills, open bank accounts, check account statements, make service requests, seek information on various products, services, offers of the bank, apply for loans, etc. through a desktop, laptop, smartphone, tablet, etc.

Some of the services under online banking include electronic funds transfer (IMPS, RTGS, NEFT, etc.), ATMs, mobile banking, internet banking, and many others. It is a convenient form of banking as it allows 24/7 access to the bank account, makes digital payments anytime and anywhere, sends instant notifications and alerts about transactions, and helps customers avoid the hassles of handling a lot of cash and do cash transactions.

About Arth Shikshan

Arth Shikshan is a FinTech initiative that aims to enhance financial literacy by explaining several basic and advanced concepts relating to banking, finance, and financial technology in vernacular languages. It is hopeful about the difference that increasing financial literacy can make to a particular society.

Banking Operations (Withdrawal, Passbook, Cheque Payee, Cheque Bearer, Deposits, Demand Draft)

Banking Operations (Withdrawal, Passbook, Cheque Payee, Cheque Bearer, Deposits, Demand Draft)

One of the fundamental jobs of every consumer-facing bank is to accept a deposit, credit it to the account holder’s account, and, based on the available credit, allow the account holder to withdraw the amount as and when required. Accordingly, this blog talks about various banking operations concerning consumers. It includes withdrawal methods, passbooks, demand drafts, cheque payee, bearer cheque, etc. So, let us get started then.

What is withdrawal?

As the name suggests, withdrawal refers to the action of withdrawing money from a particular account. Withdrawal methods have evolved over the years. Unlike a couple of decades ago, when automated teller machines (ATMs) weren’t available, people had to visit the bank, get a withdrawal coupon, and wait for their turn to withdraw money. This wasn’t just time-consuming but required the account holder to visit the bank whenever he needed cash.

However, the advent of ATMs in the early to mid-2000s simplified the withdrawal process. It allowed people to withdraw cash easily, anytime, and anywhere without visiting the bank or worrying about its working hours. Additionally, you can withdraw money through another process that requires an in-person bank visit, filling up a withdrawal slip, and submitting it to withdraw money. Let us glance through both these processes.

How to withdraw money through a withdrawal slip

  • Visit the bank
  • Take a withdrawal slip and fill the required information
  • It includes the withdrawal amount, the withdrawal account number, signature, currency denomination, etc.
  • Wait for your turn
  • Submit the withdrawal slip to the teller.
  • The teller gives the acknowledgment receipt to you
  • He further counts the cash and gives it to you.

How to withdraw money from an ATM

  • Visit the nearest ATM
  • Insert your card in the card slot
  • Select the language of your choice
  • Type your four-digit ATM pin
  • Click on the Cash Withdrawal option (either through a button or screen touch)
  • Enter the required amount (depending on your account balance)
  • Click on confirm
  • Wait for the cash to come out
  • Collect your money and your debit card from the machine

What is a passbook?

You must have heard of the term passbook. Although their use isn’t as common as it was a couple of decades ago, bank passbooks are still relevant and considered significant banking documents. A bank passbook is a booklet provided by the bank or the financial institution with which you open a bank account. The bank offers it in the welcome kit, or the banking kit, comprising your debit card and internet banking details as well.

The first page of the bank passbook comprises vital details such as your account number, customer ID, IFSC code of the branch, your name, address, etc. The passbook helps you get a brief statement of the transactions that have happened in your account. Although banks generate online statements these days, it is always good to update your passbook through an in-person visit to the bank, as it enables you to keep a physical backup of your transactions.

What do you mean by an account payee cheque?

An account payee cheque is considered a specific type of cheque payment, as the amount is deposited in the payee’s account and cannot be endorsed by the payee to anyone else. Let us see how to write an account payee cheque.

  • At the outset, draw two cross lines on the cheque’s left hand side upper corner, and write ‘Account Payee’ between the lines.
  • However, remember, if you only cross the cheque and do not write ‘Account Payee’, the bank will consider it as only crossed cheque and not an account payee one

What is a bearer cheque?

A bearer cheque is payable to the cheque bearer/ holder. It does not consist of any name designated as the payee but only the specified withdrawal amount. A bearer cheque is payable to the person who shows it at the bank for payment. You do not have to endorse a bearer cheque. You can transfer it through mere delivery. However, a bearer cheque isn’t a secure form of payment, as the chances of them being misused when lost remain high.

Is there a limit on bearer cheque withdrawal? The answer is no. If a company draws a bearer cheque to withdraw funds to employee salaries, the bank usually accepts a higher amount bearer cheque and disburses cash. However, if it is for an individual, restrictions may apply.

What are deposits?

The Indian banking environment offers four types of deposits. Let us look at each one in short.

Current Account:

A current account is also known as a demand deposit and is used by businesspersons. It does not impose any restrictions on the number of daily transactions. Additionally, it offers an overdraft facility to the account holders. However, banks do not offer any interest on the current account and charge a considerable fee to maintain it.

Savings Account:

A savings account is suitable for people with a limited income and who look forward to saving some money. On this account, account holders earn a specific amount of interest that varies from bank to bank. It allows them to deposit cash at a point in time. However, banks impose restrictions on the number of transactions done on a savings account.

Fixed Deposit:

A fixed deposit is a conventionally popular form of deposit. Here, you deposit your money for a specific period (from seven days to ten years) and earn assured returns, with an interest rate varying from five to nine percent. Some banks allow premature closure of FD, but with a penalty on it.

Recurring Deposit:

Recurring deposit is another traditional deposit type, wherein the depositor deposits a specific amount on a monthly or a quarterly basis in recurring form for a period of six to 120 months. Like FD, RD also offers a particular rate of interest. You can close an RD prematurely, but with a penalty.

What is a demand draft?

A demand draft is a prepaid negotiable payment instrument wherein the drawee bank accepts the payment’s responsibility when the payee presents the DD. To receive the payment, the DD must be provided by the concerned bank, or the instrument needs to be picked up through the clearing process. You can pay a demand draft through cash or cheque. However, cheque payment for DD is available only if the amount exceeds INR 50,000.

There’s a lot more on financial literacy-related awareness coming up on Arth Shikshan. Keep following our blog space to increase your financial literacy.

Bank Accounts Types in India

Bank Accounts Types in India

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.