1. Current Account-
The current account is the type of account opened by businessmen for their company/organization. This account is opened for business-related transactions and banks extend flexibility to account holders to conduct multiple transactions (through checks, demand drafts, etc.) as well as deposits throughout a day, conventionally without any threshold.
Current accounts do not accumulate interest rates, as opposed to savings accounts.
Current accounts usually have a higher minimum balance that is required to be maintained and attracts a penalty if not maintained.
2. Savings Account-
Savings accounts are opened by individuals to deposit their idle cash/extra cash. This deposit goes on to attract an interest rate depending on the bank. Savings accounts have a limit on the number of withdrawals within a period as well as a cap on the deposits.
Savings accounts conventionally have requirements to maintain a minimum balance, which varies from bank to bank. Some banks have zero minimum balance accounts, known as Basic Savings Bank Deposit Accounts, which have further limitations on the withdrawals/deposits.
Savings accounts in Public Sector Banks attract interest rates of around 3.5% to 4%, while some private banks pay up to 6%-7% on deposits.
A PAN Card and Aadhar card along with other necessary documents are required for opening a savings account.
3. Recurring Deposit Accounts- Recurring Deposit (RD)
accounts are a type of Term Deposits meant for customers who are committed to depositing a fixed amount of money every month. Customers can choose their RD options with the minimum limit set as low as Rs. 1,000 p.m. These deposits, then go on to earn a rate of interest periodically.
RDs are meant for customers who do not have a lump sum amount of money at their disposal.
Normally, such deposits earn interest on the amount already deposited (in the form of monthly installments) which are conventionally higher than savings accounts.
4. Fixed Deposit Accounts-Fixed deposits
are one of the safest investment instruments offered by banks. Fixed deposits are meant for customers that have a lump-sum of idle/extra cash that they wouldn’t mind locking-in for the term period, usually ranging from 1 year to 10 years.
Depending on the lump-sum amount deposited, the duration of the tenure, and the type of bank, Fixed Deposits earn an interest rate which is conventionally higher than that of savings accounts.
In the case of Fixed Deposits, the principal amount remains untouched, proving to be a very safe investment scheme.
5. Salary Accounts-
Salary accounts are on the behalf of employees of corporate institutions and businesses, to credit salaries to employees monthly/ at regular intervals as agreed upon. Salary accounts are usually zero balance accounts, conventionally offering free limitless transactions across ATMs of all banks.
However, these types of accounts don’t attract any interest from the banks. Instead, banks extend a variety of offers like cash backs and discounts on purchases through the debit card/ credit card linked to the salary account.
6. Non-Resident Indian (NRI) account-
This is the type of account that Non-Resident Indians(NRIs) can open in an Indian bank branch. In India, there are 3 types of NRI Accounts-
- Non-Resident External Account (NRE) Account- The type of account opened by NRIs to deposit their foreign earnings, i.e income earned outside India. NRE accounts are exempt from tax and accumulate interest. The amount deposited is in rupee denomination and NRE accounts facilitate savings, current and fixed deposit accounts.
- Non-Resident Ordinary Account (NRO) Account- The type of account opened by NRIs to deposit their income earned in India. NRO accounts accumulate interest and are taxable, in-line with the Tax Act of 1961. The amount deposited is in rupee denomination and NRO accounts facilitate savings, current and fixed deposit accounts.
- Foreign Currency Non-Resident Account (FCNR)- NRIs deposit a sum of money in the currency of their country of residence, allowing one to save money earned overseas in any one of the foreign currencies approved by RBI. Most banks allow FCNR deposits in the following currencies as approved by RBI- US Dollars, Pounds Sterling, Euro, Japanese Yen, Australian Dollars, and Canadian Dollars. For NRIs, FCNR is a top-notch investment as it accrues an interest and helps mitigate the risk of exchange rate fluctuations.