Types of Bank Accounts in India (Deposit Accounts)
Traditionally banks in India have four types of deposit accounts, namely Saving Banking Accounts, Current Accounts, Recurring Deposits and, Fixed Deposits.
1. Saving Account - Saving accounts are opened to encourage the people to save money and collect their savings. The saving account holder is allowed to withdraw money from the account as and when required. The interest on Saving Bank Accounts was fixed by RBI and it was fixed at 4.00% on daily balance basis. RBI has deregulated Saving Fund account interest rates and now banks are free to decide the same within certain conditions imposed by RBI.
Features of Saving Accounts -1. There is no restriction on the number and amount of deposits. However, in India, mandatory PAN (Permanent Account Number) details are required to be furnished for doing cash transactions exceeding Rs. 50,000.
2. Withdrawals are allowed subject to certain restrictions.
3. A minimum amount has to be kept on saving account to keep it functioning.
2. Current Account - Current Accounts are basically meant for businessmen and are never used for the purpose of investment or savings.
Features of Current Accounts -
(1) The main objective of Current Account holders in opening these account is to enable them (mostly businessmen) to conduct their business transactions smoothly.
(2) There are no restrictions on the number of times deposit in cash / cheque can be made or the amount of such deposits;
(3) Usually banks do not pay any interest on such current accounts.
(4) The current accounts do not have any fixed maturity as these are on continuous basis accounts.
(5) Cheque book facility is provided and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties.
Features of Current Accounts -
(1) The main objective of Current Account holders in opening these account is to enable them (mostly businessmen) to conduct their business transactions smoothly.
(2) There are no restrictions on the number of times deposit in cash / cheque can be made or the amount of such deposits;
(3) Usually banks do not pay any interest on such current accounts.
(4) The current accounts do not have any fixed maturity as these are on continuous basis accounts.
(5) Cheque book facility is provided and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties.
3. Recurring Desposit Account: Recurring Deposit is a special kind of Term Deposit offered by banks in India popularly known as RD accounts which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits.
Features of RD Accounts -
1. Recurring Deposit accounts are normally allowed for maturities ranging from 6 months to 120 months
2. These accounts can be opened in single or joint names. Nomination facility is also available.
3. Rate of Interest offered is similar to that in Fixed Deposits.
4. Interest is compounded on quarterly basis in recurring deposits.
Features of RD Accounts -
1. Recurring Deposit accounts are normally allowed for maturities ranging from 6 months to 120 months
2. These accounts can be opened in single or joint names. Nomination facility is also available.
3. Rate of Interest offered is similar to that in Fixed Deposits.
4. Interest is compounded on quarterly basis in recurring deposits.
4. Fixed Deposit Account (FD) - The account which is opened for a particular fixed period (time) by depositing particular amount (money) is known as Fixed (Term) Deposit Account. The term 'fixed deposit' means that the deposit is fixed and is repayable only after a specific period is over. Under fixed deposit account, money is deposited for a fixed period say six months, one year, five years or even ten years. The money deposited in this account can not be withdrawn before the expiry of period.
Features of FD Accounts -
1. The main purpose of fixed deposit account is to enable the individuals to earn a higher rate of interest on their surplus funds (extra money).
2. The amount can be deposited only once. For further such deposits, separate accounts need to be opened.
3. Fixed Deposit Account may be opened for a minimum period of 15 days and maximum period of 10 years.
4. The minimum amount required to open a Fixed Deposit is Rs.1000.
5. Withdrawals are not allowed. However, in case of emergency, banks allow to close the fixed account prior to maturity date. In such cases, the bank deducts 1% (deduction percentage many vary) from the interest payable as on that date.
Features of FD Accounts -
1. The main purpose of fixed deposit account is to enable the individuals to earn a higher rate of interest on their surplus funds (extra money).
2. The amount can be deposited only once. For further such deposits, separate accounts need to be opened.
3. Fixed Deposit Account may be opened for a minimum period of 15 days and maximum period of 10 years.
4. The minimum amount required to open a Fixed Deposit is Rs.1000.
5. Withdrawals are not allowed. However, in case of emergency, banks allow to close the fixed account prior to maturity date. In such cases, the bank deducts 1% (deduction percentage many vary) from the interest payable as on that date.
About (BASIC SAVING BANK DEPOSIT ACCOUNT):
- Under the guidelines issued on August 10, 2012 by RBI: Any individual, including poor or those from weaker section of the society, can open zero balance account in any bank. BSBDA guidelines are applicable to "all scheduled commercial banks in India, including foreign banks having branches in India".
- The aim of introducing 'Basic Savings Bank Deposit Account' is very much part of the efforts of RBI for furthering Financial Inclusion objectives.
Main Points of BSBDA-Small Accounts:
- In BSBDA, banks are required to provide free of charge minimum 4 withdrawals, through ATMs.
- Total credits in such accounts should not exceed 1 lakh rupees in a year.
- Maximum balance in the account should not exceed 50,000 Rs at any time
- The total of debits by way of cash withdrawals and transfers will not exceed 10,000 rupees in a month
- Foreign remittances cannot be credited to Small Accounts without completing normal KYC formalities
- Small accounts are valid for a period of 12 months initially which may be extended by another 12 months if the person provides proof of having applied for an Officially Valid Document.
ATMs: (Automated Teller Machine): The ATM debit cards, credit cards and prepaid cards (that permit cash withdrawal) issued by banks can be used at ATMs for various transactions.
Use of ATMs of Other Banks:
- 5 free transactions are permitted per month (inclusive of financial and/or non-financial) at other bank ATMs for Savings Bank Account holders.
- For transaction beyond this minimum number of transactions, banks charge maximum of Rs 20/ - per transaction.
- Reserve Bank of India reduced free usage of other bank automated teller machines (ATMs) to 3 per month from 5 from November, in six metropolitan cities - Delhi, Mumbai, Chennai, Bangalore, Kolkata and Hyderabad.
Reconciliation of failed transactions at ATMs
- The time limit for resolution of customer complaints by the issuing banks shall stand reduced from 12 working days to 7 working days from the date of receipt of customer complaint.
- Accordingly, failure to recredit the customer’s account within 7 working days of receipt of the complaint shall entail payment of compensation to the customer @ Rs. 100/- per day by the issuing bank.
- Any customer is entitled to receive such compensation for delay, only if a claim is lodged with the issuing bank within 30 days of the date of the transaction.
- All disputes regarding ATM failed transactions shall be settled by the issuing bank and the acquiring bank through the ATM system provider only.
WHITE Label ATMs: ATMs which are owned and operated by non-banking companies are called White Label ATMs.
Note: RBI authorised four entities to operate as WLAs namely Tata Communications Payment Solutions, Prizm Payment Services Pvt. Ltd, Muthoot Finance Limited and Vakrangee Ltd.
Note: RBI authorised four entities to operate as WLAs namely Tata Communications Payment Solutions, Prizm Payment Services Pvt. Ltd, Muthoot Finance Limited and Vakrangee Ltd.
Personal Identification Number (PIN) : A Personal Identification Number is a secret numeric password shared between user and a system that can be use to authenticate the user to the system.
IFSC (Indian Financial System Code):
- Indian Financial System Code is an alpha-numeric code that uniquely identifies a bank-branch participating in the NEFT system.
- This is an 11 digit code with the first 4 alpha characters representing the bank, The 5th character is 0 (zero).and the last 6 characters representing the bank branch.
- IFSC is used by the NEFT system to identify the originating / destination banks / branches and also to route the messages appropriately to the concerned banks / branches.
For ex: SBIN0015986 : i. First 4 character SBIN - refers to State Bank of India. ii. 0 is a control number. - last six characters (015986) represents the SBI branch Jail Road, Hari Nagar New Delhi.
MICR (Magnetic Ink Character Recognition): MICR stands
for Magnetic Ink Character Recognition. MICR Code is a 9 numeric digit code which uniquely identifies a bank branch participating in the ECS Credit scheme. MICR code consists of 9 digits e.g 400229128
for Magnetic Ink Character Recognition. MICR Code is a 9 numeric digit code which uniquely identifies a bank branch participating in the ECS Credit scheme. MICR code consists of 9 digits e.g 400229128
- First 3 digits represent the city (400)
- Next 3 digits represent the bank (229)
- Last 3 digits represent the branch (128)
Note: The MICR Code allotted to a bank branch is printed on the MICR band of cheque leaves issued by bank branches.
Cheque Truncation:
- Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point with the presenting bank en-route to the drawee bank branch.
- In its place an electronic image of the cheque is transmitted to the drawee branch by the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc.
- Cheque Truncation speeds up the process of collection of cheques resulting in better service to customers, reduces the scope for clearing-related frauds or loss of instruments in transit, lowers the cost of collection of cheques, and removes reconciliation-related and logistics-related problems, thus benefitting the system as a whole.
Bancassurance: The sale of insurance and other similar products through a bank. This can help the consumer in some situations; for example, when a bank requires life insurance for those receiving a mortgage loan the consumer could purchase the insurance directly from the bank.
Banking Ombudsman Scheme 2006:
i. The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks.
ii. The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services.
iii. All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.
i. The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks.
ii. The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services.
iii. All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.
Other Important Points:
- The Banking Ombudsman does not charge any fee for filing and resolving customers’ complaints.
- The amount, if any, to be paid by the bank to the complainant by way of compensation for any loss suffered by the complainant is limited to the amount arising directly out of the act or omission of the bank or Rs 10 lakhs, whichever is lower.
- The Banking Ombudsman may award compensation not exceeding Rs 1 lakh to the complainant only in the case of complaints relating to credit card operations for mental agony and harassment.
- If a complaint is not settled by an agreement within a period of one month, the Banking Ombudsman proceeds further to pass an award. Before passing an award, the Banking Ombudsman provides reasonable opportunity to the complainant and the bank, to present their case.
- If one is not satisfied with the decision passed by the Banking Ombudsman, one can approach the appellate authority against the Banking Ombudsmen’s decision. Appellate Authority is vested with a Deputy Governor of the RBI.
- If one is aggrieved by the decision, one may, within 30 days of the date of receipt of the award, appeal against the award before the appellate authority.