Types of Bank Accounts
The bank accounts are classified into three categories. These are as follows:
1. Current Account:
A Current Account or Demand Deposit Account is a running
and active account which may be opened with a bank by a businessman or an
organisation by making an initial deposit of Rs. 300 in rural areas and Rs. 500 in
urban areas. This account may also be operated upon any number of times during
a working day. This account never becomes time barred, because no interest is paid
for credit balance in this account.
Before opening a current account, banks are required to obtain references from
respectable parties, preferably those of a current account-holder. In case, a person or
a party opens an account with the bank without satisfactory references, the banker
would be inviting unpleasant results.
By accepting deposits on a current account, the banker under takes to honour his
customer’s cheques so long as there is enough money to the credit of the customer. In case
of current account, there is no limit on the amount or number of withdrawals. Under
Section 129 of the Negotiable Instruments Act, 1881, the banker may have to suffer loss
if he pays a forged cheque contrary to the instructions given by the customer.
2. Savings Bank Account:
Savings deposit account is meant for small businessmen
and individuals who wish to save a little out of their current incomes to safeguard
their future and also to earn some interest on their savings. A savings account can
be opened with as a small sum of Rs. 500. A minimum balance of Rs. 500 is to be
maintained in the account if cheque book facility is not required. However, if a
cheque book has been issued, a minimum balance of Rs. 1000 is necessary.
There are restrictions on the maximum amount that can be deposited in this
account and also on the withdrawals from this account. The bank may not permit
more than one or two withdrawals during a week and may lay down a limit on the
amount that can be withdrawn at one time.
Savings account holders are allowed to deposit cheques, drafts, dividend warrants,
etc., which stand in their name only. For this facility, it is necessary that account
holder must be introduced by a person having a current or savings account in the
same bank. However, the banks do not accept cheques or instruments payable to
third party for deposit in the savings bank account. Banks allow interest on deposits
maintained in savings accounts according to the rates prescribed by the Reserve
Bank of India.
3. Fixed Deposit Account:
Money in this account is accepted for a fixed period, say
one, two or five years. The money so deposited cannot be withdrawn before the
expiry of the fixed period. The rate of interest on this account is higher than that
on other accounts. The longer the period, the higher is the rate of interest. Fixed
deposits are also called “time deposits” or “time liabilities.” Fixed deposits have
grown its importance and popularity in India during recent years. These deposits
constitute more than half of the total bank deposits.
The following are the special characteristics of fixed deposits:
(a) Suitability: Fixed deposits are usually chosen by people who have surplus money
and do not require it for some time. These deposit accounts are also favoured by
the bankers because fixed deposit funds can be utilised by them freely till the due
date of the repayment.
(b) Rate of Interest: The rate of interest and other terms and conditions on which
the banks accept fixed deposits are regulated by the Reserve Bank of India. The
Reserve Bank of India revised the rates of interest on fixed deposits several times.
Banks can use fixed deposits for the purpose of lending or investments. So they
pay higher rate of interest on fixed deposits. Though interest is payable at the
stipulated rate, at the maturity of the fixed deposit, banks usually pay interest
quarterly or half-yearly also at the request of the depositor.
(c) Restrictions on Withdrawals: Withdrawal of interest or the principal amount
through cheques is not permitted. The depositor is not given a cheque book. At
the request of the customer, the banker may credit the amount of interest or the
principal to his saving or current account from which he may withdraw the same
through cheques.
(d) Payment before Due Date: Banks also permit encashment of a fixed deposit even
before the due date, if the depositor so desires. But the interest agreed upon on
such deposit shall be reduced.
(e) Advances Against Fixed Deposits: The banker may also grant a loan to the depositor
on the security of the fixed deposit receipt. Banks are now free to determine the
interest rate chargeable on loan advances of over Rs. 2 lakhs.
4. Recurring Deposit Account:
The Recurring Deposit Account has gained wide
popularity these days. Under this, the depositor is required to deposit a fixed amount
of money every month for specific period of time. Each instalment may vary from
Rs. 50 to Rs. 500 or more per month and the total period of account varies from 12
months to 10 years. After the completion of the specified period, the customer gets
back all his deposits along with the cumulative interest accured on them.
Recurring deposit account offers the following benefits to the public:
(a) It provides a good way to save in small amounts for use in the future, e.g.,
education of children, marriage of children, etc.
(b) People having low income may open a recurring deposit account with a
commitment to deposit as low as Rs. 100 every month.
(c) The recurring deposit account can be opened for any period ranging from 12
months to 120 months.
(d) Standing instructions to transfer monthly instalments from the savings account
of the depositor are carried out without any charge.
(e) Loan can be taken up to 90% of the deposits if the depositor needs money.
The bank accounts are classified into three categories. These are as follows:
1. Current Account:
A Current Account or Demand Deposit Account is a running
and active account which may be opened with a bank by a businessman or an
organisation by making an initial deposit of Rs. 300 in rural areas and Rs. 500 in
urban areas. This account may also be operated upon any number of times during
a working day. This account never becomes time barred, because no interest is paid
for credit balance in this account.
Before opening a current account, banks are required to obtain references from
respectable parties, preferably those of a current account-holder. In case, a person or
a party opens an account with the bank without satisfactory references, the banker
would be inviting unpleasant results.
By accepting deposits on a current account, the banker under takes to honour his
customer’s cheques so long as there is enough money to the credit of the customer. In case
of current account, there is no limit on the amount or number of withdrawals. Under
Section 129 of the Negotiable Instruments Act, 1881, the banker may have to suffer loss
if he pays a forged cheque contrary to the instructions given by the customer.
2. Savings Bank Account:
Savings deposit account is meant for small businessmen
and individuals who wish to save a little out of their current incomes to safeguard
their future and also to earn some interest on their savings. A savings account can
be opened with as a small sum of Rs. 500. A minimum balance of Rs. 500 is to be
maintained in the account if cheque book facility is not required. However, if a
cheque book has been issued, a minimum balance of Rs. 1000 is necessary.
There are restrictions on the maximum amount that can be deposited in this
account and also on the withdrawals from this account. The bank may not permit
more than one or two withdrawals during a week and may lay down a limit on the
amount that can be withdrawn at one time.
Savings account holders are allowed to deposit cheques, drafts, dividend warrants,
etc., which stand in their name only. For this facility, it is necessary that account
holder must be introduced by a person having a current or savings account in the
same bank. However, the banks do not accept cheques or instruments payable to
third party for deposit in the savings bank account. Banks allow interest on deposits
maintained in savings accounts according to the rates prescribed by the Reserve
Bank of India.
3. Fixed Deposit Account:
Money in this account is accepted for a fixed period, say
one, two or five years. The money so deposited cannot be withdrawn before the
expiry of the fixed period. The rate of interest on this account is higher than that
on other accounts. The longer the period, the higher is the rate of interest. Fixed
deposits are also called “time deposits” or “time liabilities.” Fixed deposits have
grown its importance and popularity in India during recent years. These deposits
constitute more than half of the total bank deposits.
The following are the special characteristics of fixed deposits:
(a) Suitability: Fixed deposits are usually chosen by people who have surplus money
and do not require it for some time. These deposit accounts are also favoured by
the bankers because fixed deposit funds can be utilised by them freely till the due
date of the repayment.
(b) Rate of Interest: The rate of interest and other terms and conditions on which
the banks accept fixed deposits are regulated by the Reserve Bank of India. The
Reserve Bank of India revised the rates of interest on fixed deposits several times.
Banks can use fixed deposits for the purpose of lending or investments. So they
pay higher rate of interest on fixed deposits. Though interest is payable at the
stipulated rate, at the maturity of the fixed deposit, banks usually pay interest
quarterly or half-yearly also at the request of the depositor.
(c) Restrictions on Withdrawals: Withdrawal of interest or the principal amount
through cheques is not permitted. The depositor is not given a cheque book. At
the request of the customer, the banker may credit the amount of interest or the
principal to his saving or current account from which he may withdraw the same
through cheques.
(d) Payment before Due Date: Banks also permit encashment of a fixed deposit even
before the due date, if the depositor so desires. But the interest agreed upon on
such deposit shall be reduced.
(e) Advances Against Fixed Deposits: The banker may also grant a loan to the depositor
on the security of the fixed deposit receipt. Banks are now free to determine the
interest rate chargeable on loan advances of over Rs. 2 lakhs.
4. Recurring Deposit Account:
The Recurring Deposit Account has gained wide
popularity these days. Under this, the depositor is required to deposit a fixed amount
of money every month for specific period of time. Each instalment may vary from
Rs. 50 to Rs. 500 or more per month and the total period of account varies from 12
months to 10 years. After the completion of the specified period, the customer gets
back all his deposits along with the cumulative interest accured on them.
Recurring deposit account offers the following benefits to the public:
(a) It provides a good way to save in small amounts for use in the future, e.g.,
education of children, marriage of children, etc.
(b) People having low income may open a recurring deposit account with a
commitment to deposit as low as Rs. 100 every month.
(c) The recurring deposit account can be opened for any period ranging from 12
months to 120 months.
(d) Standing instructions to transfer monthly instalments from the savings account
of the depositor are carried out without any charge.
(e) Loan can be taken up to 90% of the deposits if the depositor needs money.
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