Indian banks offer multiple types of accounts for different purposes, whether you’re a minor student, a grad straight out of college, or an NRI. In this article, we’re going to explore different types of bank accounts suited to different objectives, and find out what makes each of them special.
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Savings Account
This is the most common type of bank account in India. You can either get an individual or joint account for the purposes of saving money in the long term. By depositing money in this account, you can earn a nominal interest in the range of 2.5% – 6% per annum.
There is no restriction on the number of times one can deposit money in a savings account. This is the reason why savings accounts are also considered very liquid – almost as liquid as cash.
Minimum balances, fees, and hidden charges are different for different banks. Some also allow for zero balance accounts which can be used for a variety of different purposes.
Savings accounts receive debit cards, ATM access, cheque books, and passbooks, along with online credentials to track their savings and spendings with ease.
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Current Account
Current accounts are ideal for businesses and individuals with frequent transactions. They don’t earn interest on the balance, but prioritise ease of access and functionality. All businesses, including partnership firms, companies, sole proprietorship firms, associations, and also trusts, can open a current account.
These accounts often come with cheque issuance facilities for making payments and may offer overdraft options for short-term credit needs.
A few current accounts with specific banks also allow seamless currency conversion transactions inbuilt into the app infrastructure.
Salary Account
Offered by banks in collaboration with companies, salary accounts simplify salary management. Your salary is directly credited to this account, and you might enjoy benefits like fee waivers on account maintenance charges or discounts on other bank products.
These accounts typically function like regular savings accounts with additional features tailored for salaried individuals.
Fixed Deposit Account
FD accounts are ideal for parking a lump sum for a fixed tenure. You deposit a specific amount and lock it in for a chosen period (ranging from a few months to several years).
FDs offer a predetermined interest rate, which is generally higher than savings accounts. The interest earned can be compounded periodically, further accelerating your returns.
Recurring Deposit Account
RD accounts are a great way to inculcate a regular savings habit. You commit to depositing a fixed amount (recurring deposit) at regular intervals (monthly, quarterly, etc.) for a predetermined period.
This instils discipline and helps you accumulate a lump sum at maturity. RDs often offer higher interest rates compared to regular savings accounts.
NRO Savings Account
An NRO (Non-Resident Ordinary) Savings Account is a specialised account designed for NRIs living and working outside India. It allows them to manage their Indian Rupee (INR) earnings and savings conveniently while residing abroad.
Interest earned on the NRO account balance is taxable in India. NRIs are responsible for paying taxes on this income, although the applicable tax rate might be lower under a Double Taxation Avoidance Agreement (DTAA) between India and their country of residence.
NRO FD Account
Similar to regular FD accounts, NRO FDs allow NRIs to deposit a lump sum for a fixed tenure ranging from a few months to several years.
The deposited amount is locked in for the chosen period, and NRIs earn a predetermined rate of interest on the deposit.
NRE Savings Account
An NRE (Non-Resident External) Savings Account is a beneficial banking solution designed specifically for NRIs with earnings overseas.
It allows NRIs to deposit and manage their income earned in foreign currency, converted into Indian Rupees (INR), while enjoying tax advantages.
NRE FD Accounts
An NRE Fixed Deposit (FD) account functions similarly to an NRE savings account and offers fixed interest rates and a predetermined tenure.
Foreign Currency Non-Resident Account
FCNR accounts are beneficial for NRIs receiving income in foreign currency or those who prefer to hold their savings in a specific foreign currency for future use abroad. FCNR accounts allow NRIs to avoid currency fluctuations by holding their savings in a stable foreign currency of their choice.
In some cases, depending on the NRI’s tax residency status and the terms of the account, there might be tax exemptions or reduced tax rates on the interest earned.
