Types of Bank Accounts in India: You're missing out on benefits!

Welcome to the world of banking, where your money can grow and multiply in ways you never thought possible! In India, there are different types of bank accounts available to cater to the diverse financial needs of individuals and businesses. Whether you're a businessman like Raju or a salaried person like Rohit, choosing the right type of account can make all the difference in achieving your financial goals.

Let's take a closer look at Raju's situation. As a businessman, he's been using a savings account to manage his finances. While this may seem like a safe and easy option, he's missing out on the many benefits that a current account can offer. With a current account, Raju would have access to features like overdraft facilities, cheque-clearing services, and easier management of business transactions. By not taking advantage of these benefits, Raju could be hindering the growth of his business and limiting his potential for success.

On the other hand, we have Rohit, a salaried person who's been using a current account for his day-to-day banking needs. While this may seem like a convenient option, Rohit is missing out on the benefits of a savings account. A savings account can offer interest on deposits, flexible withdrawal options, and even tax benefits. By not considering a savings account, Rohit may be passing up an opportunity to increase his reserves and achieve his long-term financial goals.

Choosing the right type of bank account is crucial, whether you are a business owner like Raju or a salaried person like Rohit. By selecting an account that suits your financial goals and needs, you can make the most of the features and benefits offered by your bank.

So, if you are looking for a bank account that will meet your specific financial requirements? This guide will assist you in navigating the various types of bank accounts available in India and selecting the one that best suits your needs. This guide will provide you with the information you need, whether it’s a high-interest savings account, an account with lower transaction fees, or an account with convenient online banking options. Let's dive in!

Types of Bank Accounts in India

"Money makes the world go round," and there are bank accounts to meet everyone's needs, from young children to seniors.

Are you curious about the number of bank accounts in India? Well, let me tell you, it's a constantly changing figure that's hard to keep up with. As of June 1, 2022, the number of bank accounts opened under the Pradhan Mantri Jan Dhan Yojana stood at a whopping 48.76 crore!

But wait, that's not all! Standing at 87%, India has the highest acceptance rate in the banking sector! The global number for the same metric is 64%. This goes to show how much the developing monetary needs of the country will readily accept a working system. There is still room for growth, however, as about 190 million Indians remain unbanked.

India currently has 33 licensed private and public banks as of September 2022! Only time will tell if these banks will be able to handle the nation’s growing needs. Will more players enter the arena, or are more mergers in the cards for Indian banks?

So, although the banking industry in India is so volatile, with numbers constantly fluctuating, one thing's for sure – it's a number that's constantly on the rise!

Savings account

Ah, the trusty savings account - a classic and timeless option for anyone looking to keep their hard-earned money safe and secure. If you're someone who loves to save, a savings account is like a piggy bank on steroids!

Think of it as a safe haven for your money, where you can deposit and withdraw funds at your convenience while earning interest on the balance. And the best part? You can start with as little as a hundred bucks!

Let's take the example of Maya, a young professional who has just started her career. She's been working hard and saving up to buy her dream car. Instead of keeping her savings at home, she decides to open a savings account at a local bank.

With a savings account, Maya can easily deposit her salary, withdraw money when needed, and even set up an auto-debit to transfer a fixed amount to another account every month. And as time passes, she'll earn interest on her balance, allowing her savings to grow faster!

Savings accounts also offer various features like ATM cards, online banking, and more, making it easy to manage your money on the go. Plus, with most savings accounts offering easy access to your funds, you can rest assured that your money is always within reach.

So, If you're a saver at heart, a savings account is the perfect place to start. With a savings account, you can keep your money safe and watch it grow over time while earning a small amount of interest. A savings account is a great way to ensure your finances are secure, whether it's for a rainy day fund or a dream vacation.

Current Account

Are you constantly busy in the business world? Do you frequently move money between your financial accounts? The current account is the beehive for you, then, my friend! 

The current account is the ideal place to keep your honey because it was created for corporations, business owners, associations, institutions, and even religious institutions. In contrast to savings accounts, there is no cap on the amount of nectar you can deposit or the number of times you can change hives (transfer money).

However, there's still more! The current account, which has a higher minimum balance requirement than a savings account, is the queen bee of accounts. Don't worry if you ever get into a jam; an overdraft facility is available through the current account, which is a welcome relief. There are no buzz-killing fees if you withdraw more money than you actually have in your account.

One thing to keep in mind is that the current account does not earn interest, but who needs that when you're busy building your empire? So, whether you're a beekeeper or a tech startup, a current account is the hive for you.

Recurring Deposit Account

Have you heard of a Recurring Deposit (RD) account? It's the ideal way to save money while also earning interest—talk about a win-win situation! 

As an investor, you deposit a fixed amount on a fixed date into your RD account on a repeated basis, and you receive at a predetermined interest rate and maturity. Oh, and did I mention? Compounding allows you to earn even higher returns over time. It's like watching your money grow right in front of your eyes!

One of the coolest aspects of RD accounts is that they teach people how to save money. It's like having a personal coach to encourage you to pinch your pennies every month. The best part is that the minimum amount required to open an RD varies by bank, so you can find one that fits your budget. 

Let us now look at the time range. An RD account has a six-month minimum deposit period and a ten-year maximum deposit period. So, whether you're a short-term or long-term saver, you have options.

To keep track of your savings, a passbook is issued for your RD account. That's similar to keeping a small diary that shows how much money you've saved over time. In addition, the bank will levy up to a 1% penalty for early withdrawals from recurring deposits. Bank interest rates vary according to the bank's policies.

And here's another great feature – the interest rate on an RD account is higher than what you'd get with a savings account. Cha-ching! Plus, you can even nominate someone to receive the money in case anything unfortunate happens to you. It's like setting up a safety net for your loved ones.

That’s RD accounts for you. It's the ideal way to save for a special occasion or simply to watch your money grow over time. 

Salary Account 

Picture this: You just landed that dream job you've been eyeing for ages, and your employer tells you that they'll be setting you up with a salary account. You're probably wondering what that is, right? Well, fear not, my friend, because I've got you covered!

A salary account is like a VIP account that's exclusively reserved for employees of big corporations and businesses. It's the bank account where your company sends your hard-earned salary every month, so you can sit back and watch your money grow. And to top it off, you can watch your money blossom like a plant, with no limit to how much it can grow!

But wait, there's more! With a salary account, you get to be the boss of your money. You can make independent transactions and send funds to other accounts without any restrictions. Plus, it's a zero-balance account, which means you can withdraw all your dough anytime you want, no questions asked!

And the cherry on top? All fund transfers, from NEFT to IMPS to RTGS, are offered at lower rates! So, you can send money to your friends and family without breaking the bank. But hey, if you ever go AWOL on your salary account for more than 3 months, don't worry, the bank won't leave you high and dry. They'll simply convert your account to a savings account, and you can pick up where you left off whenever you're ready!

So there you have it, folks! A salary account is like a magical door to financial freedom that is just waiting for you to step through. What are you waiting for?

NRI Account 

Are you a globetrotting NRI making waves around the world? If so, you should be familiar with the three different types of accounts available to you in India.

First up, we have the Non-Residential Ordinary Account, or NRO for short. This account is perfect for managing the income that you've earned in India. You can deposit as much money as you want, and there's no limit to how much balance you can maintain!

Next, we have the Non-Residential External Account or NRE. This is the account for you if you're looking to deposit earnings or savings from outside India. With an NRE account, you can deposit as much money as you want, and there's no limit to how much balance you can maintain. Plus, the principal and the interest earned on that principal are tax-free!

Last but not least, we have the Foreign Currency Non-Residential Account or FCNR. If you're earning overseas, this is the account for you. There is no cap on the amount you can deposit or keep in your account as a balance. Furthermore, both the principal and the interest earned on it are tax-free! The only catch is that you can only open a fixed deposit account with a minimum maturity of one year via the FCNR account.

That’s all there is to it. Whether you manage income earned in India or deposit income from another country,  there is an NRI account that is perfect for you.

Fixed Deposit

Fixed deposits can be thought of as a trusty piggy bank - but instead of opening it every time you need money, you can let it grow and earn interest over a set period of time until it matures. What's more? There is no limit to the amount of money you can save in your FD account.

Hold on, though, the list doesn’t end there! You can specify the time period and deposit amount, and the interest rate will be calculated accordingly. When the term of your FD expires, you'll receive a handsome interest payment from the bank. As a reward for being patient and wise with your money.

But be warned, breaking your FD before the term is up can result in a loss of interest, so think twice before taking the plunge. Having said that, FDs are widely regarded as a low-risk investment option with high returns, making them a no-brainer for savvy savers.

The Bottom Line

And let us not forget the critical role that the banking system plays in the economic growth of our country. The banking system, like crude oil, is the lifeblood of the economy, directing savings into investments and thus keeping the wheels of progress turning. It facilitates the flow of capital required to finance businesses, drive investment, and create opportunities for economic growth. Banks play an important role in promoting economic growth and development, from enabling small business owners to make investments to ensuring resources are allocated efficiently.

We've discussed the various types of bank accounts available in India. There is a banking solution for everyone, whether you want a low-risk option to save your hard-earned money or a high-yield account to get the most out of your investments. If you have the right banking system in place, you can make the most of your money and accelerate your financial success.