Today we are going to discuss different types of bank accounts that could poeople open in the bank.
For Indian Citizens
These are also called as ‘Deposit Accounts‘, asit is never used for investment or savings.
- Mainly for businessmen, companies, and institutions.
- No limit to a number of transactions or amount of transactions in a day.
- No Interest is paid by the Bank on current account.
- Cheque facility is provided
These are also called as ‘Investment Accounts‘. One of the most accessible accounts for an individual. Most of the banks have limitations for the maximum number of transactions in a period.
- The customer is allowed to make up for 6 pre-authorized transfers or withdrawals (excluding withdrawals via Automated Teller Machine) per month
- Until 24th of October 2011, it was fixed at 4% on daily basis accounts. However w.e.f. 25th October 2011, RBI has deregulated the interest rates and now banks are free to decide the same.
- Any default in regulations often leads to a service charge up to Rs 10 per transaction.
Fixed Deposit Account
Generally known as‘FD Accounts’ or‘Bonds’.
- The term “Fixed” denotes the period of maturity or tenor.
- All the banks in India offer a different range of tenures for periods from 7 days – 10 years.
- However, the depositor can ask for breaking or closing the FD prematurely by paying penalty usually 1% or varies more or less according to the bank.
- The rate of interest keeps on changing according to the market rates and it differs from bank to bank.
- Usually, a bank FD is paid a lump sum at the time of maturity, however, most of the banks provide facility to pay or credit the interest on savings account at every quarter end.
- Popularly known as ‘RD Account’.
- These are special kind of ‘Term Deposits’ and are available to the people who do not have lump sum amount of savings.
- These accounts earn interest on the amount already deposited at the same rates as are applicable for Fixed Deposits.
- Under this type, a person has to deposit a fixed amount of money every month.
- These are generally allowed for maturity for about 6 months – 120 months.
- Passbook facility is available.
- Any default in instalments attracts some penalty.
Accounts for NRI
- Full form – Non- Resident External Rupee Account.
- The primary source of funds deposited into NRE accounts must be from your earnings abroad
- Both Principal and Interest can be repatriated(can be converted to any foreign currency) / transferred out of India
- Accounts are maintained in Indian Rupee and can be in the form of savings, current, fixed or recurring.
- Interest income and the balances held in the account are excluded from Income tax
- Full form- Non-Resident Ordinary Rupee Account.
- Regular bank accounts of a person, who becomes an NRI, also get converted into NRO accounts
- The source of funds deposited into NRO accounts can be from India or abroad. An NRO account can hold income earned in India (such as dividends, pension or rental income)
- Principle amount cannot be repatriated outside India in foreign exchange, without prior permission of the Reserve Bank of India
- Foreign Tourist can open such account for maximum 6 months.
- The accountis maintained in Indian rupee and can be opened as savings as well as current.
- Here the interestrates and the balances are subjected to respective income tax
- Currency Non-Repatriable account deposits
- Foreign FCNR accounts have to be opened and maintained in the foreign currency itself.
- This is a Fixed Deposit Foreign Currency Account
- FCNR accounts can be opened in five different currencies viz., US dollar, Pound Sterling, Euro, Jap Yen, Canadian Dollar & Australian Dollar.
- The source of funds deposited into FCNR accounts has to be from sources abroad. They can also be from your other NRE or FCNR accounts.
- The principal amount and the interest are fully repatriable.
- Interest income earned on the money in an FCNR account is non-taxable in India.
- FCNR is free from currency risk as it keeps the money in same currency.
EEFC Account ( Foreign Exchange )
- Full form- Exchange Earners Foreign Currency Account.
- This account is maintained in foreign currency with an Authorized Dealer Category.
- All categories of foreign exchange earners, such as individuals, companies, etc. who are resident in India, can open EEFC accounts
- An EEFC account can be held only in the form of a current account.
- Cheque facility is available for operation of the EEFC account.
- No interest is payable on EEFC accounts.
- This facility makes easier for the account holders by crediting 100% foreign exchange earnings to the account, so that they do not have to convert foreign exchange into Rupees and vice versa, thereby it minimizes the transaction cost.