There are mainly 5 types of bank accounts in India. These include Savings account, Current account ,Fixed deposit account, Recurring deposit account and NRI accounts.
In India, banks are considered the best places for the safe keeping of our money. In addition to protecting our money, banks also pay interest on it, which keeps compounding over time.
One can open an account with any of the banks available in India. However, it is very necessary to choose the right bank account that best suits your requirements.
So, today we will see the types of bank accounts in India that you can choose from based on your requirements.
What are types of Bank Accounts in India?
There are primarily five types of bank accounts in India:
1. Savings Account
Savings account is the most common type of bank account. It can be opened individually and jointly.
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Suitable for: Salaried class, students, senior citizens, and women.
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Benefits: Savings accounts, such as Senior Citizens accounts, offer numerous health and investment-related benefits.
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Limitations: Minimum balance requirement, low-interest rates, and comes with monthly withdrawal limits.
2. Current Account
A current account, also referred to as a financial account, is a type of deposit account kept by people who conduct a high volume of banking transactions on a regular basis.
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Suitable for : Business People.
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Benefits: No transaction limit, no limit on deposits, transactions can be carried out using a check, internet banking, or demand drafts.
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Limitations: No interest on deposits and some banks also charge service charges for transactions.
3. Recurring Deposit account
An individual can open a recurring deposit account, which allows for interest-bearing monthly deposits of a fixed amount, for a set period of time. In contrast to FDs, where you must make a lump-sum deposit, the amount you must invest here is lower and more frequently.
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Suitable for: Salaried people
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Benefits: Higher interest rates, monthly payments instead of a lump sum payment, risk-free.
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Limitations: Penalty for premature withdrawal.
4.Fixed Deposit Account
A fixed deposit (FD) account enables you to earn a fixed rate of interest for locking away a specific amount of money for a predetermined period of time, or until the FD matures.
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Suitable for: People having future goals like saving for children’s education or marriage.
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Benefits: Higher interest rates, flexible duration to choose (as low as 7 days and go up to a maximum of 10 years), risk-free.
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Limitations: Penalties on pre-mature withdrawal, fixed interest rates till tenure even if interest increases in the market.
5.NRI Account
An NRI account is any account opened with a bank or financial institution that has been granted permission by the Reserve Bank of India (RBI) to offer a variety of services to NRIs.
There are 3 types of NRI bank accounts.
1. Non-Residential External Account (NRE)
An NRI can transfer and save foreign earnings to India using this account.
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Benefits: Interest earned is tax-free, can be opened individually or jointly by two NRIs, can deposite in foreign currency, withdraw in Indian currency, and can transfer funds to another NRE account as well as to an NRO account.
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Limitations: Conversion loss as a result of fluctuations in the value of the rupee relative to other currencies.
2.Non-Residential Ordinary Account (NRO)
An NRO account is a bank account opened in India in the name of an NRI to manage his or her income earned in India.
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Benefits: Can be opened by an NRI along with an Indian citizen or another NRI, unaffected by the rate of conversion, deposit in both foreign and Indian currencies; and withdrawal only in Indian currencies.
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Limitations: Cannot transfer funds from an NRO account to an NRE account.
3.Foreign Currency Non-Residential Account (FCNR)
opened by an NRI and contains deposits in one of their preferred currencies that the RBI has approved.
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Benefits: Interest earned is tax-free, and can be opened jointly with two or more NRI account holders.
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Limitations: Penalties on pre-mature withdrawals, deposits are held only in term deposits. It cannot be held in a current, savings, or recurring account.
So, these are the major types of bank accounts available in India. Which type of bank account you prefer and why? Feel free to discuss.