What are the different types of Bank Accounts?

In India, there have been four types of accounts, Current Accounts, Saving Banking Accounts, Recurring Deposits, and Fixed Deposits. In recent years, due to the increasing competition, few other banks have been introduced with new products that combine the features of the above two or more types of deposit accounts. However, these have not gained popularity among the Indian public.

We will focus mainly on the four types of bank accounts available in the Indian Banking System:

• Current Account: These type of accounts are popular in India and are apt for businesses. These accounts are availed by businessmen as joint or single due to the huge number of transactions done on daily basis. Current accounts are not much used for the purpose of savings or investment, and there is no limit on the number of transactions in a day. They are basically used for depositing and withdrawing funds along with various other transactions. These accounts are termed as demand deposit accounts, and banks such as commercial, rural, and cooperative offer the facility of current accounts. Deposits that remain in these accounts don't earn interests.

The features of Current/Checking Accounts are:

1. Current accounts enable limitless withdrawals in line, and the cash transaction fees are levied.
2. Accounts opened at the bank's home branch, have no restrictions on the number of deposits done into it. Account-holders can deposit their cash at other branches on paying fees as applicable.
3. For making direct payments to creditors, one can issue cheques, demand-drafts, or pay-orders through their current account. 
4. Current accounts facilitate the industrial progress of India, and without it, businessmen might face difficulties in operating their businesses.
5. With this type of account, businesses can also gain benefits by availing facilities such as free inward remittances, deposits, and withdrawals, multi-location transfers, and many more.
6. Account holders can get overdraft facilities.
7. Businessmen can do withdrawals from their current accounts without any limit barriers, subject to banking cash transaction tax.
8. Current accounts have the facility of internet banking and mobile banking that enable the account holders to conduct vital withdrawals and transfers promptly and at ease.
9. This account has the option of assisting creditors of the account holder who have the access to the information on his credit-worthiness through inter-bank connections.

• Savings Account: It is the most popular deposit account, and can be opened by a depositor at any bank it desires. Savings account are used for depositing funds and earning interest. Although the interest earned on a savings account is based on a minimum average balance maintained in the account, some banks do offer interest rates as high as 6-7% a year on daily or saving bank accounts. Do note that banks have the leverage to decide the rate of interest for these accounts, and the rates may vary across banks. The account holder can access its account whenever desired and withdraw funds whenever it's required. 

The features and benefits of a savings bank account are:

1. If you desire to park surplus funds, then deposit them in a savings bank account because this account acts as a safety box for you. You can store all emergency funds for unexpected situations which could arise in the future.
2. Funds deposited in this account earns interest quarterly, and the rate of interest is lower than other deposits because these funds aren't invested (locked) for some particular period like an FD. At the moment, the interest rate varies from 4% to 6.55% a year.
3. Savings accounts are always safe, be it in a nationalised bank or any other financial institution.
4. This account provides its holders with much liquidity, and the bank will provide debit/ATM cards which can be used to make a certain number of withdrawals.
5. One vital advantage provided by a savings account is the discounts it offers on locker rental facilities for those who maintain the minimum quarterly balance.

• Recurring Deposit Accounts: These accounts apt for investors who want monthly saving rather than depositing lump sum. They earn interest every month and might pay a penalty if the deposit is not done. Deposits in these accounts earn compound interest quarterly. Rd accounts are opened at any post office or bank and the longer the tenure of the monthly deposits, the higher it will earn interest. This account enables the user to build a corpus by depositing cash monthly and receive an attractive corpus on maturity.

The vital characteristics of RD are:

1. RDs builds the habit of saving regularly.
2. They can be made for a minimum of six months to a maximum of 10 years.
3. Higher rates of interest and good returns.
4. Banks may offer loan facilities on RD.
5. If required, RDs can be withdrawn before maturity.
6. Senior citizens are eligible to get higher interest rates.

• Fixed Deposit Accounts: Fixed deposit account enables its user to enjoy the liquidity of a savings account and obtain high returns. It's a combination of a fixed deposit as well as a savings account where the user can avail the benefit of gaining higher interest than a savings account and enjoy the liquidity of a savings account. However, there is also a provision for penalty if the beneficiary withdrawals before the maturity.

The features and benefits of these accounts are:

1. Attractive interest: The interest rates on fixed deposits are greater as compared to the interest in a regular savings account.
2. Flexible tenure: Tenure of Fixed deposit varies from 1 month to 10 years.
3. Investment amount: These accounts offer the flexibility of choosing the amount of money the depositors desire to deposit.
4. Easy to open: The whole process of applying and opening this account is easy, and not much documentation is required.
5. Auto-renewal: Banks usually allow the auto-renewal of FDs, ensuring the account holders not to worry on renewals.

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