Bank account, helps us to keep track of our savings, earning and it keeps our money safe. It also provide some interest on the amount that we kept in the bank. Compared to the money kept in wallet and at home, bank is much reliable and accountable option.
If you are looking to open a bank account then it is very important to understand, what are your needs and what are the types of bank account that bank has to offer.
- Types of bank account in India
- What is Saving account?
- What is Current Account?
- What is Demat Account?
- Salary Account
Types of bank account in India
In India, different types of bank account can be categorized broadly in three category
- Saving account
- Current account
- Demat account
We have discussed Salary account separately after Demat account.
What is Saving account?
Saving account is the most common banking product that a bank offers to is its customer. As per the RBI guideline any person can open bank account with banks operating in India depending on certain criteria. Savings Bank accounts, as the name implies are intended for savings for future need and helps in money management. The very purpose of this type of account is to promote savings habit of the general public.
From the bank and economy prospective it also allows banks to lend loan
There are mainly two types of saving bank account
- Basic Savings Bank Deposit Account (BSBDA)
- Small saving bank account
BSBDA account can be opened by any individual provided he/she has valid KYC documents.
As per BSBDA account RBI guideline, this service is provided by all the banks in most of their branches across India. The person who is interested in opening BSBDA account with any bank cannot have any other Savings Bank Account with the same bank. If the customer already has a Savings Bank Account, the same will have to be closed within 30 days of opening a Basic Savings Bank Deposit Account.
Features of BSBDA Account
- An individual is eligible to have only one ‘Basic Savings Bank Deposit Account’ in one bank. Although one can have Term/Fixed Deposit, Recurring Deposit etc., accounts in the same bank.
- There is no requirement for any initial deposit for opening a BSBDA.
- no limit on the number of deposits that can be made in a month.
- Free ATM Debit Cards and no Annual fee.
- No need to maintain Average Monthly Balance.
- In BSBDA account, minimum four withdrawals is provided free of charge be it through ATMs or other mode including RTGS/NEFT/Clearing/Branch cash withdrawal/transfer/internet debits/standing instructions/EMI etc.. Balance enquiry through ATMs is not counted in that.
- Facilities like Local Clearing Cheque,Balance and Interest Statement,Pass Book,Net Banking / Mobile Banking / Phone Banking,Debit Card Replacement of Lost / Stolen,Account Closure etc are available without any extra charges.
Small saving bank account
This type of bank account can be opened by any individual above 18 years old, who do not have Officially Valid KYC documents. There are many restrictions in operation of the account due to the relaxed KYC.
Features of small saving bank account
- Since KYC is not mandatory, it requires self-attested photograph submission and signature verification.
- There is no Minimum balance amount required for opening small saving account but Account balance at any point should not exceed Rs.50,000 at any time.
- Total credits in such small account should not exceed 1,00,000 rupees in a year.
- Maximum 10,000 can be withdrawn in form of cash or transfer from small saving account in a month.
- All debit transactions (including clearing) is permitted maximum upto Rs.10,000 per transaction. Cheque issued over Rs.10,000 will be rejected and returned .
- Foreign remittances cannot be credited to Small Accounts without completing normal KYC formalities.
- Small accounts are valid for a period of 12 months initially, another 12 month can be given for getting KYC complied.
if BSBDA is opened on the basis of Simplified KYC, the account is treated as “BSBDA-Small account” and it comes under small saving bank account.
So the difference between BSBDA and BSBDA-Small account are manly in terms of KYC compliance constraint at the time of account opening, limited credit and account balance and monthly transaction limit.
Earlier, the savings account rates were regulated by RBI at 4%. But after deregulation in 2011, banks are now free to offer their own rates.
Some banks such as Kotak-Mahindra offers interest rate upto 6% on saving bank account. The interest amount is usually created on half yearly basis or at the end of financial year.
RBI allows banks to provide extra customized facilities in saving bank account depending upon customer based by putting reasonable price for that.
This allows bank to provide products like corporate salary account, premium Salary account, premium savings account specialized account features for women senior citizens, businessman, students etc. Even for loan also, banks usually opens a loan account in name of yours and it deposit EMI in that account by deducting from your account.
Minimum Amount Balance(MAB) for saving accounts
Most of the major banks in India and has revised the Service charges w.e.f from 01st October 2017. Following categories of Savings Bank Accounts are excluded from MAB requirement:
i) Financial Inclusion Accounts(Jan Dhan Accounts)
ii) No frill accounts
iii) Salary Package accounts
iv) Basic Savings Bank Deposit Accounts
v) Small Accounts
vi) Pehela Kadam and Peheli Udaan accounts.
vii) Minors up to the age group of 18 (Primary Account Holder)
viii) Pensioners, all categories, including recipients of social welfare benefits.
What is Current Account?
Current account is the banking service that allows managing finances of business which involve frequent banking transactions. It is must to have if you are in business, start-up or freelancing and do frequent withdrawal and deposits.
A Current account is called zero interest account. Which means you are not going to earn any interest on the money kept in this. A Current Account holder needs to maintain a minimum balance that varies from bank to bank. minimum balance is calculated as average of daily closing balances of each day spread over a period of three months.
KYC is must for this.
Features of Current bank account
- Free monthly cash deposit limit at various branches of the bank upto 5 times compared to saving account.( may vary depending on bank to bank and can be as high as 2-3 crores).
- Unlimited cash withdrawal from home branch, from non-home branch there may be an upper limit depending on current account type.
- Local and inter-city cheque collection & payment is free for unlimited amount.
- Unlimited intra bank account transfer.
- Free payment and collection using NEFT/RTGS.
- Doorstep Banking services.
- Priority internet/phone banking services.
- It allows you to deposit money or pay your creditors with the help of chargeless services like cheques and demand drafts.
- Overdraft facility for dealing with short term financial crunches.
- Customized facilities for traders, merchants, Agri business etc.
Holding a Current Account not only gives a clear picture of the finances of your business but also outlines your credit worthiness. It helps in tracking the growth of business by separating out personal transaction with business transaction.
What is Demat Account?
Saving and earning is at own place but investment is a habit that is must to have. It not only helps in generating wealth over a time but also help us in beating inflation.
Demat account is required to have if you want to invest in share market.
Demat stands for ‘dematerialised’. Means shares and securities are held electronically in a Demat account instead of storing it in hard copies . Anyone who wants to start investing in the stock market opens Demat account with an investment banker or a sub-broker.
Demat account easily convert your physical holdings into electronic form, for easy access and trading. This Demat account number is then used for all transactions made in the stock market. The values of shares/securities are kept hold in your demat account for buy and sell purpose which can be transferred automatically to linked saving bank account. It allows Traders get to work from anywhere as there’s no complicated paperwork involved.
Requirements to open a Demat account
Here’s all you need:
- PAN card details: Must to have. To eliminate the existence of fake trading accounts, it has been made mandatory for people to furnish their PAN card details while opening a Demat account.
- Personal verification: A PAN card is not enough. You also need to meet your Demat account provider and verify all your personal details in person. In most of the case the broker whom you will consult will do all the task as you will be face to face for signing the account opening form.
Note:- You don’t need Demat account for investing in mutual funds.
Salary account or corporate salary account is a saving bank account which is primarily meant for your salary credit purpose. It is opened by your employer for whom you work or provide your services, to credit your salary. You can’t open salary bank account on your own in any of the bank branch. It needs to have a collaboration with your organization regarding that.
Normally, In most of the corporate on your joining date employer invites bank personnel and they help you in opening salary bank account without visiting bank. Salary account is designed for people from the salaried class. These are zero balanced account and just like saving account you get interest paid on your saving by bank as per their rule.
Banks offer various customized service to attract employer and employee. These includes priority service, Unlimited ATM transaction from any ATM, offers exclusive for salaried class on loan and credit card, Lounge access, Insurance, specialized account for Government/PSUs/Defence personnel etc.
FAQ on salary account
Can Salary account be a joint account?
Yes, It can be. You need to talk to your bank manager regarding this. By completing formalities you can have joint account. Many banks offers add on facility to add your family member as well. Even you can extend your salary account benefits to your family member’s bank account in the same bank.
Can we deposit money in salary account?
Obviously, you can operate it like normal saving account as well. Deposit and withdrawal, Cheque and draft all those facilities you are having with salary account.
What will happen to salary account if I switches company?
Your existing salary account will convert to normal saving bank account with salary is not get credited for continuous 3 months. If you are interested in carry forward this account then you can contact bank regarding employer change. they will give you an employer change form and then you can enjoy the same bank account with new employer. Now the perks and facilities offered by bank will entirely depend on your employer type, their corporate agreement which can be better than your previous employer.
Are reimbursement and allowances credited to salary account also?
No, salary account is meant for salary credit purpose only. This account will be used by your payroll section for crediting amount at the end of month while processing employee payroll. Any credit other that this by your employer usually happen in your current account. Some banks even offer “Employee reimbursement account” along with salary account for processing such credit.