Different Types of Bank Accounts in India

Different Types of Bank Accounts in India & their Features!

Read different Types of Bank Accounts in India & their Features here! As per our Banking Awareness Best Series, here is one more article through which you can increase your banking awareness. In India, Bank Accounts are mainly categorized into Demand Deposits (Savings Account and Current Account), Time Deposits (Fixed deposits and Recurring deposits) and Non-resident accounts. In this article, we will brief you about different types of bank accounts in India with their distinct features.

Types of Bank Accounts in India

There are mainly three types of Banking accounts in India:

1. Demand Deposits

2. Term Deposits

3. Non-Resident Deposits

Now, we will study one by one, starting from Demand Deposits.

1. Demand  Deposits

• In these types of accounts, money is payable on demand.
• It includes current accounts and savings accounts (CASA - Current Account and Savings Account)

(a) Savings account: A savings account is an interest-bearing account held at a bank.

• There are mainly three types of saving accounts in Indian banks:

         (i) Basic Savings Bank Deposit Accounts (BSBDA)

         (ii) Basic Saving Bank Deposit Accounts Small scheme

         (iii) Normal Saving Bank Account

(i) Basic Savings Bank Deposit Accounts (BSBDA)

• According to RBI guidelines in August 2012, all banks are required to convert the existing 'no-frills' accounts’ into 'Basic Savings Bank Deposit Accounts'.
  No Frills Account- These accounts were introduced by RBI in November 2005 to provide banking facilities to the poor section of society. These accounts had the facility of ‘nil’ or very low minimum balance.
• An individual can open only one BSBDA account in one bank.
• These accounts are normal banking accounts available to all customers.
• There are no restrictions on age and income criteria of the individual for opening BSBDA.
• Know Your Customer (KYC) norms are applicable to these accounts.
• Jan Dhan accounts under Pradhan Mantri Jan Dhan Yojana comes under this category.

(ii) Basic Saving Bank Deposit Accounts Small Scheme

• When a person doesn't possess any of the ‘official valid documents’, still he/she can open ‘small accounts’ with banks.
• Total deposit money by a person in such accounts should not exceed one lakh rupees in a year.
• Withdrawal money limit in this account is ten thousand rupees in a month.
• Any time maximum balance in the account should not exceed fifty thousand rupees.
• These 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 official valid document.
• Small Accounts can only be opened at the Core Banking Solution (CBS) linked branches.

(iii) Normal Saving Bank Account

• In this account, facilities and minimum balance vary from bank to bank.
• Generally, these accounts are held by individuals like the salaried person, student etc.

(b) Current Account: A current account is an interest-free account held at a bank.

• People engaged in business prefer these types of accounts.
• In this account, there is no restrictions on the number of transactions permitted per day.
• For providing these facilities, banks take charges from the customers.
• Banks also provide overdraft facility to the customers. Overdraft facility allows the company or businessman to withdraw more money than what they have in their accounts with a promise of repayment of money within a stipulated time frame.

2. Term Deposits

• In these types of accounts, money is deposited for a specific period.
• In this, the interest rate given by the bank is more than the saving account.
• Interest rate slightly higher for senior citizen (60+ years)
• It includes Recurring Deposit and Fixed Deposits. 

(a) Fixed Deposit 

• In this type of deposits, banks accept deposits varying from 7 days to a maximum of 10 years.
• Interest rate varies from bank to bank.
• Pre-withdrawal facility available with some penalties.

(b) Recurring Deposit

• In this type of accounts, banks accept a fixed amount from a customer in fixed installments in regular interval of time.
• Deposit period varies from six months to ten years.

3. Non-Resident Deposits

• These accounts are only held by non-resident Indians.
• Currently, there are three types of Non-Resident Deposits accounts in India.

(a) Foreign currency Non-Resident (Banks): FCNR (B)

• These accounts are only opened and maintained in the foreign currency.
• These accounts can be opened in the following currencies viz., US dollar, Pound Sterling, Euro, Japanese Yen, Canadian Dollar and Australian Dollar.
• Only term deposit is allowed.
• These accounts are non-taxable in India.
• In these accounts, the principal amount and the interest are fully repatriable.
  Repatriable- Defined as sending or bringing money back to the foreign country.

(b) Non-Resident External Rupee Account (NRE)

• These accounts are held in Indian rupee.
• Term deposits and saving deposits are allowed.
• These accounts are also non-taxable in India.
• In these accounts, the principal amount and the interest are fully repatriable.

(c) Non-Resident Ordinary Rupee Account (NRO)

• Anyone individual residing outside India is eligible for NRO Account.
• If Indian resident migrated abroad can shift his account to this category.
• Term deposits and saving deposits are allowed.
• These accounts are taxable in India.
• In these accounts, the principal amount is non-repatriable.
• Interest amount can be repatriable.

4. Other Accounts

(a) DEMAT Account

• DEMAT stands for Dematerialised Accounts.
• These accounts are used to transact shares in electronic format.

(b) Nostro Account

• These accounts are held by Indian Banks in foreign Banks in foreign currency.
• Example- Punjab National Bank has an account in Bank of America in dollars.
• (i) Loro Account
  (a) These accounts are held by a third party bank, other than both banks who are doing the transaction.
  (b) Example: If South Indian bank wants to do some transaction with Bank of America in dollars in the USA. but he doesn't have the account in with Bank of America. State Bank of India has an account with Bank of America in the USA in dollars. If State bank of India does the transaction in the bank of America in the USA on behalf of South Indian bank. In this case, for SBI this account is known as Nostro Account and for South Indian Bank it is known as Loro Account.

(c) Vostro Account

• These accounts are held by foreign banks in India in Indian Rupees.
• Example: Bank of America has an account in Punjab National Bank in Indian Rupees.

(d) Escrow Account

• It is the temporary pass through an account held by third parties during the transaction between two parties.

(e) GILT Account

• These accounts are maintained by investors with the Primary dealers for holding their Government securities and Treasury bills in the Demat form. 

                     ---------------------------------