While doing day to day transactions at the bank, we come across new terms. While opening an account at any bank, person should ensure what kind of account he/she needs. Banks offer different types of bank accounts as per the person’s needs.
Every large economy in the world directly or indirectly depends upon the banking structure. Banks are aware of the opportunities available in the market. So they want to offer much more flexibility to their customers in their routine economic transactions.
By the time you finish reading this article, you will be able to recognize different types of bank accounts, their characteristics and how to open these accounts.
Banks have designed their products keeping the needs of their customers at the center. Similarly, banks provide wide range of account types to their customers in order to provide prompt service to customers as per their need.
Table of contents 1. What is Saving Account? 2. What is Zero balance Account? 3. What is Current Account? 4. What is Over Draft Account? 5. What is Fixed Deposit account? 6. What is Recurring Deposit account? 7. What is NRE bank account? 8. What is NRO bank account?
What is Saving Bank Account?
A saving bank account is an account operated by any resident individual. Resident individual is the person who is citizen of India. Saving account may have minimum balance limit according to respective bank policies. The person can deposit, withdraw cash from the account, open FD or RD accounts. Eligible customers can also avail loans. Saving bank account customers are also eligible for availing overdraft facilities provided they satisfy certain criteria enlisted by their banks.
How to open a saving bank account?
By default, any person who asks for opening account for personal use will be provided with saving bank account form by the bank. Along with this form, the person is required to submit officially valid documents (OVDs), which contain their name and address details. Passport photographs and conduct quick KYC procedure as per directed by bank officials.
After opening a saving bank account, customer will be able to perform his/her day to day banking activities. You will be provided with a passbook, ATM/Debit card, Chequebook etc. In order to conduct the online transactions, you will have to register for net banking services of your bank.
What is a Zero balance Account?
Zero balance or No frills account was introduced to address needs of poor population. In order to provide them benefits of banking by transferring various subsidies such as LPG, housing, crop etc. directly to their account. Jan Dhan Account introduced by Government of India is an example of zero balance account.
Major part of population came under banking sector after zero balance accounts were popularized.
How to open a zero balance account?
You will have to visit the desired bank and ask for zero balance account opening form. Typically, the forms are similar for both saving bank account as well as zero balance account, however, you should ensure this with the bank official. Along with OVDs, you need to provide your photographs and conduct KYC procedure as per instructed.
What is Current Account?
The current account is particularly meant for business purposes. If you are proprietor and want to open bank account in the name of your proprietorship firm, then current account is your solution. Current account holder can perform transactions of any amount with limited service charges. The current account facilitates business needs and allows smooth transfer of funds from the account. Holder of current account can also opt for overdraft services.
How to open a current account in bank?
You will need to produce your personal as well as business OVDs at the bank. Personal OVDs include your Aadhar card, PAN card, photographs etc. Your firm’s OVDs include UdyogAadhar, or registration certificate or receipt by municipality, PAN card (if any) etc. The current account form will be provided to you by bank official. You will also get ATM/Debit card, Chequebook after opening account. You won’t receive a passbook as you will be receiving statement of your account on demand.
What are RD/FD types of Account in Bank?
Fixed Deposit and Recurring Deposit accounts are meant for encouraging customers to create savings out of their income and get interest in return. If you have a certain sum of money that you want to invest, then you can invest it as Fixed Deposit. Fixed deposits offer better returns on the investment if you invest in it for at least a year. Fixed deposits can be opened for period of less than one year also and maximum investment period of 10 years.
Recurring Deposit types of account in the bank contrary to FD accounts involve, adding a fixed amount of sum every month to RD account. This sum will mature after period of a year or maximum up to 5 years. After that you will receive the interest upon the total amount saved through recurring deposit.
In order to open any of the FD or RD type of account in bank, you need to have a regular Saving or Current account with the bank. If in any case you want to redeem or withdraw the amount accumulated or fixed from these accounts, before the maturity period ends, bank will charge certain amount as penalty and then transfer remaining amount to your account.
How to open RD/ FD account?
Bank official will provide you with the forms for opening RD or FD account form, which you will need to fill up. Don’t forget to fill nominee details on the form properly. Sign on the form and submit it to the bank.
What is Over Draft Account?
In this type of account, banks provide extra limit to their customer for withdrawal in excess to their account balance. In return bank charges certain amount of interest on the amount withdrawn. This type of account is particularly useful for customers having current accounts. The overdraft limit allows business owners to quickly access much needed extra funds from OD account.
How to open OD Account?
If you need to open an OD account, then you should contact the branch. Your bank will normally check your transaction history and balance with the bank before allotting you this facility. However, you can also apply for overdraft over your FD as a security.
Types of Accounts for NRI Customers in Bank
Many Indians have to live abroad for various purposes like, education, job or business. Considering needs of such customers banks provide special types of account for these customers. NRE and NRO are mainly focused to the NRI customer’s needs.
What is NRE account?
Non-Resident External account can be opened by NRI living in any country. The earnings by NRI customer in the foreign country can be deposited to this account. All the balance in NRE account is completely exempted from tax. The amount you deposit in this type of account will be in foreign currency and withdrawal will be necessarily in INR. This gives rise to exchange risk. The amount in NRE account can be easily repatriated to a limit of 1 million dollars in a financial year.
What is NRO account?
Non-Resident Ordinary account is available for NRI customers. The main difference between NRE and NRO account is that, the amount deposited in NRE can be from income outside India, however the amount deposited in NRO account will always be in INR.
To simplify it further, NRO account can be used by NRI customers to deposit earnings in India such as rent.
How to open NRE/NRO account?
You will have to produce all the details regarding your current status of residence. Complete the necessary KYC procedure at the branch and your account will be ready to be operated.
Hope this article helped you to understand different types of bank accounts. There are few more types of accounts that we left purposefully for some other time.