How to Open a Bank Account?
Credit: North Loop
A bank is the most indispensable part of all of our lives. But do you know the origin of the word bank? Even though there is no unanimity of opinions, most say that it has gotten derived from ‘Banco’, ‘Bancus’, or ‘Banc’, all of which mean a bench which was used by moneylenders to transact business and display their coins. Also, banks as we know today – institutions saving, lending and investing money – were once known as shroffs, goldsmiths, seths etc. Interesting right? Now that we know a little history about banks let us delve a little deeper into the various kinds of banks that exist today and their different types of accounts.
The different kinds of banks based on their functions –
Commercial Banks – These banks get regulated under the Banking Regulation Act, 1949, and their main objective is to earn profits. The primary function of commercial banks is to accept deposits and grant loans to the general public, corporates and the Government without charging any concessional rates unless instructed by the RBI. These banks can get further classified into – Public sector banks, private sector banks, and foreign banks. Some examples of commercial banks are State Bank of India (public sector bank) , HDFC Bank (private sector bank), Deutsche Bank (foreign bank) etc.
Small Finance Banks – These banks look after the micro industries, small farmers, small business units, and the unorganized sector of the society by providing them financial assistance. They are licensed under Section 22 of the Banking Regulation Act, 1949 and get governed by the provisions of the RBI Act, 1934 and FEMA (Foreign Exchange Management Act). Some examples of small finance banks are North East Small Finance Bank Limited, Capital Small Finance Bank Limited etc.
Payments Banks – These banks have gotten conceptualized by the RBI and are allowed to accept restricted deposits. While they offer services like ATM cards, debit cards, net-banking and mobile-banking, Payments banks do not provide loans or credit cards to their customers. Some examples of Payments Banks are NSDL Payments Bank, Jio Payments Bank, Airtel Payments Bank etc.
Co-operative Banks – These banks serve entrepreneurs, small businesses, or industries and work on a no-profit-no-loss basis. They are registered under the Cooperative Societies Act, 1912 and get run by an elected managing committee. The co-operative banks also finance agriculture-based activities like farming and livestock in rural areas. Some examples of Co-operative Banks are Andhra Pradesh State Co-operative Bank Ltd., The Gujarat State Co-operative Bank Ltd., The Goa State Co-operative Bank Ltd. etc.
Small Finance Banks – These banks look after the micro industries, small farmers, small business units, and the unorganized sector of the society by providing them financial assistance. They are licensed under Section 22 of the Banking Regulation Act, 1949 and get governed by the provisions of the RBI Act, 1934 and FEMA (Foreign Exchange Management Act). Some examples of small finance banks are North East Small Finance Bank Limited, Capital Small Finance Bank Limited etc.
Payments Banks – These banks have gotten conceptualized by the RBI and are allowed to accept restricted deposits. While they offer services like ATM cards, debit cards, net-banking and mobile-banking, Payments banks do not provide loans or credit cards to their customers. Some examples of Payments Banks are NSDL Payments Bank, Jio Payments Bank, Airtel Payments Bank etc.
Co-operative Banks – These banks serve entrepreneurs, small businesses, or industries and work on a no-profit-no-loss basis. They are registered under the Cooperative Societies Act, 1912 and get run by an elected managing committee. The co-operative banks also finance agriculture-based activities like farming and livestock in rural areas. Some examples of Co-operative Banks are Andhra Pradesh State Co-operative Bank Ltd., The Gujarat State Co-operative Bank Ltd., The Goa State Co-operative Bank Ltd. etc.
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Types of bank accounts –
The different types of bank accounts are as follows -
Savings Account – This bank account can get opened individually or jointly to save money. There is no limit to the number of times you can deposit money into this account. The most important feature of this bank account is that it pays interest on the deposit in the account that ranges from 4-7% and varies with every bank. Most banks also have a minimum balance requirement for a savings account. However, some options like the Axis Bank zero balance account or Axis Bank savings account can get opened without any minimum balance (though they come with added restrictions). You can instead go for an online bank account opening with zero balance, no limitations and additional benefits with a digital service provider like North Loop.
Current Account – This bank account usually gets opened by businessmen, associations, institutions or companies and is used for business-related transactions. These accounts offer flexibility and do not have any limitation on the number of times that money can get deposited or withdrawn from them. Internet banking and overdraft facility are also available with current accounts. However, no interest gets paid on the deposits maintained in this bank account.
Recurring Deposit Account – In this type of bank account, periodic or monthly deposits need to get added until it reaches a fixed maturity date. The amount of deposit can be as low as Rs.50 per month and varies from bank to bank. Nomination facility is also available with this account along with the premature withdrawal of funds (after payment of a penalty). The interest rate offered on this type of bank account varies with every bank.
Fixed Deposit Account – Fixed deposit accounts require the deposit of a fixed sum of amount for a specific tenure. The amount that gets deposited can be withdrawn only after that tenure and earns a fixed rate of interest that is usually higher from the interest earned in a savings account. Full repayment of the maturity amount in a fixed deposit account is also allowed but only after payment of a penalty. You can open a fixed deposit bank account with North Loop and enjoy a high-interest rate of 7.75% on your FD.
DEMAT Account – This bank account gets used to keep shares and securities in an electronic format. It helps to facilitate easy trade of bonds and shares and allows the transfer of securities with reduced paperwork. KYC compliance is mandatory for opening this type of bank account.
NRI Account – This type of bank account can get opened by NRIs and are of the following three types: NRO (Non-Resident Ordinary), NRE (Non-Resident External) or FCNR (Foreign Currency Non-Resident) Account. While the NRO account gets used to deposit the income earned in India (such as rental income from property in India), the NRE and FCNR accounts get used for depositing money earned abroad in Indian and foreign currency respectively. To read about the 10 best banks for NRE/NRO accounts in India, click here.
Savings Account – This bank account can get opened individually or jointly to save money. There is no limit to the number of times you can deposit money into this account. The most important feature of this bank account is that it pays interest on the deposit in the account that ranges from 4-7% and varies with every bank. Most banks also have a minimum balance requirement for a savings account. However, some options like the Axis Bank zero balance account or Axis Bank savings account can get opened without any minimum balance (though they come with added restrictions). You can instead go for an online bank account opening with zero balance, no limitations and additional benefits with a digital service provider like North Loop.
Current Account – This bank account usually gets opened by businessmen, associations, institutions or companies and is used for business-related transactions. These accounts offer flexibility and do not have any limitation on the number of times that money can get deposited or withdrawn from them. Internet banking and overdraft facility are also available with current accounts. However, no interest gets paid on the deposits maintained in this bank account.
Recurring Deposit Account – In this type of bank account, periodic or monthly deposits need to get added until it reaches a fixed maturity date. The amount of deposit can be as low as Rs.50 per month and varies from bank to bank. Nomination facility is also available with this account along with the premature withdrawal of funds (after payment of a penalty). The interest rate offered on this type of bank account varies with every bank.
Fixed Deposit Account – Fixed deposit accounts require the deposit of a fixed sum of amount for a specific tenure. The amount that gets deposited can be withdrawn only after that tenure and earns a fixed rate of interest that is usually higher from the interest earned in a savings account. Full repayment of the maturity amount in a fixed deposit account is also allowed but only after payment of a penalty. You can open a fixed deposit bank account with North Loop and enjoy a high-interest rate of 7.75% on your FD.
DEMAT Account – This bank account gets used to keep shares and securities in an electronic format. It helps to facilitate easy trade of bonds and shares and allows the transfer of securities with reduced paperwork. KYC compliance is mandatory for opening this type of bank account.
NRI Account – This type of bank account can get opened by NRIs and are of the following three types: NRO (Non-Resident Ordinary), NRE (Non-Resident External) or FCNR (Foreign Currency Non-Resident) Account. While the NRO account gets used to deposit the income earned in India (such as rental income from property in India), the NRE and FCNR accounts get used for depositing money earned abroad in Indian and foreign currency respectively. To read about the 10 best banks for NRE/NRO accounts in India, click here.
How to open a bank account online?
Compare accounts to find the right one – If you are wondering how to open a bank account online, this is one of the first steps to consider. Compare different bank accounts and factor in their card types, minimum balance requirements, availability of mobile App, ATM withdrawal fees, monthly fees and other transaction charges. It is best to weigh in on all your options and choose the one that perfectly suits your needs. For example, even though you might get access to a bank account like the Axis Bank zero balance requirement account, the restrictions that come with it (such as a limit on deposits/withdrawals etc.) might not be perfect for you. If you wish to go for an account that offers online bank account opening with zero balance, free ATM withdrawals, zero charges, nil transaction fees, loan-availability as well as quick online application, you should definitely consider North Loop. You can use its app and carry on all banking activities from the comfort of your home.
Apply for your account – While most bank accounts like the HDFC bank account, Axis bank savings account and others claim to offer an online application option, in reality, it is not like that. After you fill an online form on their website, you have to wait for one of their executives or bank officials to visit your home and collect the necessary documents. However, North Loop does offer an exclusively online bank account opening facility with minimal paperwork and no delays.
Verify your identity – An in-person verification is mandatory to open an account with most banks. However, some of them allow uploading a recent photograph with the application form for verification of your identity.
Make a deposit – Once you submit your form along with the documents and it gets approved, you have to deposit a minimum amount to your account before you can start using it. (North Loop offers a zero balance account with no minimum deposit requirement).
Apply for your account – While most bank accounts like the HDFC bank account, Axis bank savings account and others claim to offer an online application option, in reality, it is not like that. After you fill an online form on their website, you have to wait for one of their executives or bank officials to visit your home and collect the necessary documents. However, North Loop does offer an exclusively online bank account opening facility with minimal paperwork and no delays.
Verify your identity – An in-person verification is mandatory to open an account with most banks. However, some of them allow uploading a recent photograph with the application form for verification of your identity.
Make a deposit – Once you submit your form along with the documents and it gets approved, you have to deposit a minimum amount to your account before you can start using it. (North Loop offers a zero balance account with no minimum deposit requirement).
Documents required –
The documents required for opening a savings bank account are as follows -
Identity proof
Address proof
PAN card
Form 16
Passport-sized photographs
Identity proof
Address proof
PAN card
Form 16
Passport-sized photographs
How to close an existing bank account?
Closing a bank account usually involves writing a bank account close application letter that gets addressed to the bank branch manager. Since a bank account close application letter is an official document, it should be concise and clear. Here are some things you should remember when applying for a savings bank account closure –
Keep the subject of the letter as – ‘Closure of savings bank account’
Mention your identity and bank account details
Attach a photocopy of your identity proof with the letter
Check your account balance before applying for the closure
Transfer or withdraw the money present in your account
Return your passbook, debit cards, chequebook and other documents
Keep the subject of the letter as – ‘Closure of savings bank account’
Mention your identity and bank account details
Attach a photocopy of your identity proof with the letter
Check your account balance before applying for the closure
Transfer or withdraw the money present in your account
Return your passbook, debit cards, chequebook and other documents
Conclusion –
Banks offer a large variety of services and products to suit every kind of requirement and cater to all your financial needs. Also, with a wide array of banking options available today, it is natural to get confused about the perfect choice. That is why it is best to compare all alternatives and go with the one that is most convenient and aligns well with your financial requirements and goals.
If you want to open an account with North Loop, click here.
If you want to open an account with North Loop, click here.
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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.
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