Different Types Of Bank Accounts in India: Meaning, Use, Features, Importance

In today’s complex financial landscape, understanding the various types of bank accounts is more crucial than ever. Bank accounts have evolved far beyond mere repositories for money. They have become powerful tools tailored to meet our unique financial needs. Each option offers a distinct purpose, from the simplicity of savings accounts to the flexibility of NRI accounts.

Did you know that in 2021, there were approximately 7.97 billion bank accounts worldwide? That’s a staggering number, reflecting the importance of banking in our daily lives.

In this blog, we aim to provide you with an overview of the different types of accounts in banks and their unique features. Whether you’re a seasoned banking veteran or just starting your financial journey, understanding the options available to you is crucial for making informed decisions about managing your money.

Types of Bank Accounts

In India, several types of bank accounts are designed to cater to individuals’ diverse financial needs. Let’s explore each of them with a touch of human connection.

Savings Account:

A savings account is the most common type of bank account used by individuals for everyday banking needs. Its primary purpose is to provide a secure place to deposit and manage your money while earning a modest interest. Savings accounts are suitable for personal use, offering features like ATM/debit cards, online banking, and easy withdrawal facilities. They are available to both residents and non-residents of India.

Benefits of Savings Account:

• A savings account provides a sense of financial security. 
• Opportunity to earn interest on your deposited money
• A savings account offers liquidity and easy access to your funds.
• Having a savings account acts as a financial safety net during emergencies. 
• A savings account helps you stay focused on your financial objectives.

Eligibility Criteria to Open a Savings Account: 

• The applicant must be at least 18 years old
• Identity proof documents such as an Aadhaar card, passport, Voter ID, etc. 
• Address proof documents such as utility bills, Aadhar Card, etc
• KYC documents such as PAN card, Aadhaar Card, and photos. 

Current Account:

A current account is typically opened by businesses, self-employed individuals, and professionals who require frequent transactions and higher withdrawal limits. It is specifically designed to facilitate daily financial operations, such as making payments to suppliers, receiving payments from customers, and managing cash flow. Current accounts usually don’t offer interest but provide facilities like overdrafts and chequebook issuance.

Benefits of Current Account: 

• Provides convenience and flexibility for your day-to-day banking needs. 
• You can efficiently manage your finances. 
• Current accounts often come with a range of additional banking services.
• Availability of an overdraft facility.
• For businesses, a current account is essential for managing financial operations smoothly.
• Having a current account establishes a relationship with a bank or financial institution.

Eligibility Criteria to Open a Current Account: 

To open a current account, certain eligibility criteria need to be met. Here are the typical requirements:

• A current account is primarily meant for businesses, so the eligibility criterion has a legally recognised entity. This includes partnerships, sole proprietorships, limited liability partnerships (LLPs), private limited companies, public limited companies, and other registered entities.
• Proof of business registration is essential when opening a current account. This can be in the form of a certificate of incorporation, partnership deed, memorandum of association, articles of association, or any other legally recognised document that establishes the existence of your business.
• As an account holder, you’ll need to provide valid identity proof. 
• Proof of the business address is necessary when opening a current account. You can provide documents such as a recent utility bill (electricity, water, gas), rent agreement, property tax receipt, or any government-issued address proof. 
• KYC documents
• Depending on the nature of your business, you may need to provide additional documents as proof of the business.

Recurring Deposit Account:

A recurring deposit (RD) account is an excellent savings option for individuals who want to save a fixed amount regularly over a specific period. RDs help inculcate a disciplined savings habit and offer a higher interest rate than regular savings accounts. They are suitable for people with a regular source of income and require a low initial deposit.

Benefits of Recurring Deposit Account: 

• It promotes disciplined savings by allowing you to deposit a fixed amount each month regularly.
• Offer attractive interest rates that are higher than standard savings accounts. 
• It offers a convenient way to build your savings without significant financial commitments.
• Provide flexibility in choosing the tenure of the deposit.
• Recurring deposit accounts provide stability and security.
• A recurring deposit account can serve as collateral for obtaining loans or credit facilities from the bank. 

Eligibility Criteria to Open a Recurring Deposit Account: 

Certain eligibility criteria need to be met to open a recurring deposit account. Here are the typical requirements:

• The applicant must be at least 18 years old
• Identity proof documents such as an Aadhaar card, passport, Voter ID, etc. 
• Address proof documents such as utility bills, Aadhar Card, etc
• PAN card details
• Minimum deposit amount and account details from which investment amount will be deducted
• Bank account details such as passbook and bank statement
• Income proof documents

Fixed Deposit Account:

Fixed deposit (FD) accounts are popular among individuals looking to earn higher interest on their savings. With FDs, you deposit a lump sum amount for a fixed duration at a predetermined interest rate. They offer stability, assured returns, and flexible tenure options. FDs are suitable for both short-term and long-term financial goals.

Benefits of Fixed Deposit Account: 

• A fixed deposit account offers a secure investment option with guaranteed returns.
• Provide a predetermined interest rate for a fixed period.
• Offer flexibility in choosing the tenure of your investment.
• Fixed deposits can serve as an additional source of income. 
• Fixed deposits can be used as collateral to secure bank loans or credit facilities.
  It encourages financial discipline and goal-oriented savings. 

Eligibility Criteria to Open a Fixed Deposit Account: 

Certain eligibility criteria need to be met to open a fixed deposit account. Here are the typical requirements:

• The applicant must be at least 18 years old
• Identity proof documents such as an Aadhaar card, passport, Voter ID, etc. 
• Address proof documents such as utility bills, Aadhar Card, etc
• PAN number
• Minimum deposit amount and account details from which investment amount will be deducted
• Bank account details such as passbook and bank statement
• Income proof documents

DEMAT Account:

A DEMAT account is essential for individuals interested in trading and investing in the stock market. It is an electronic repository to hold shares and other securities in a dematerialised format, eliminating the need for physical share certificates. A DEMAT account enables easy buying, selling, and transferring of securities, making it convenient for investors to participate in the stock market.

Benefits of DEMAT Account: 

• A DEMAT account provides a convenient and secure way to store your securities electronically.
• You can seamlessly trade and invest in various financial instruments, such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs).
• It enables swift and efficient transactions.
• You reduce the risks associated with physical certificates, such as loss, theft, or forgery. 
• It ensures you can easily participate in corporate actions, such as dividends, bonus issues, rights issues, and stock splits.

Eligibility Criteria to Open a DEMAT Account: 

To open a DEMAT account, certain eligibility criteria need to be met. Here are the typical requirements:

• The applicant must be at least 18 years old
• Identity proof documents such as an Aadhaar card, passport, Voter ID, etc. 
• Address proof documents such as utility bills, Aadhar Card, etc
• Bank account details such as passbook and bank statement
• Income proof documents

NRI Account:

NRI (Non-Resident Indian) accounts are specifically designed for Indians living abroad. They allow NRIs to manage their finances in India and facilitate easy remittance of funds. NRI accounts come in different variants, such as NRE (Non-Resident External), NRO (Non-Resident Ordinary), and FCNR (Foreign Currency Non-Residential) accounts, each with its own eligibility criteria, benefits, and features.

Benefits of NRI Account: 

• An NRI account provides a convenient platform for managing your finances while residing outside your home country.
• Effortless money transfer to your home country or transfer funds abroad.
• Offer the advantage of repatriating funds.
• NRI accounts may provide tax benefits.
• NRI accounts grant access to various investment opportunities in India.
• For NRIs investing in Indian real estate, NRI accounts are instrumental in managing property transactions.

Eligibility Criteria to Open an NRI Account: 

To open an NRI (Non-Resident Indian) account, certain eligibility criteria need to be met. Here are the typical requirements:

• Individuals must hold NRI status
• Valid visa and passport
• Overseas address proof
• Indian address proof
• KYC documents

How to Know Your Account Type?

To determine your account type, you can follow these steps:

1. Contact the Bank: The most direct and reliable way to know your account type is by contacting your bank. You can visit the nearest branch, call their customer service helpline, or send an inquiry through their official website or mobile banking app. Bank representatives are well-equipped to assist you in identifying the specific type of account you hold.
2. Review Account Documents: Look at the account-opening documents provided by the bank when you initially opened the account. These documents may include terms and conditions, account agreements, or any other paperwork related to your account. They often mention the account type or provide details to help you identify it.
3. Online Banking Platform: If you have access to online banking, log in to your account and explore the account summary or profile section. Many banks display the account type associated with your account on their online platforms. This information can be found in the account details or settings sections.
4. Bank Statements: Examine your bank statements for any information about the account type. Typically, the account type is mentioned along with the account number, transaction details, and account holder’s name. Regular bank statements often provide insights into the specific account you hold.
5. Consult a Bank Representative: If you’re still unsure about your account type, visit the bank and consult a representative in person. They will be able to access your account information, review your banking history, and provide you with accurate details about the type of account you have.

In conclusion, understanding the different types of bank accounts is crucial for managing your finances effectively. Whether you’re looking to save, invest, or transact, choosing the right account type can make a significant difference in achieving your financial goals. You can select an account that aligns with your specific needs and preferences by exploring the various options available.