A Bank is a Financial Institution which accepts checking and savings deposits and grant loans. Also, Banks provide related services such as individual retirement accounts (IRAs), certificates of deposit (CDs), and currency exchange. In addition, they allow you to earn interest on your deposits, which helps you compound your investment or savings.
Private banks, public sector banks or nationalized banks, foreign banks, and cooperative banks are the four types of banks in India. Therefore, Citizens in India can open different types of bank accounts with any of these four types of banks.
WHY WE NEED BANK ACCOUNTS?
Different Types of Bank Accounts are important for numerous reasons as listed below –
- Firstly, they allow the safekeeping of money.
- Secondly, funds can be transferred to other accounts quickly.
- Thirdly, banks offer interest on money kept in a savings account along with many free/ low-cost services like credit/debit cards, cheque facilities, overdraft facilities etc.
- Fourth, A bank account simplifies the process to obtain loans and other forms of credit.
- Lastly, Many government institutions recognise the identity provided by a bank account.
To understand how to choose a bank account that meets your needs, you must first understand the different types of bank accounts available among each of the four types of banks. There are various types of bank accounts in India to choose from.
Types of Bank Accounts In India are:
1. Savings Account
Any individual in India with an Aadhaar card and a PAN card, that are both required to open a bank account in India, can open a savings account.
Key Characteristics of a Savings Account
Limit: The amount of money that can be saved in a savings account is unlimited. Depending on your bank, the number of transactions may be limited in some cases.
Balance: In most cases, a consumer is expected to maintain a mandatory minimum balance in order to keep a savings account open.
One savings account with a zero balance is opened for each person under the Pradhan Mantri Jan Dhan Yojana (PMJDY).
Interest: A consumer receives interest on savings account deposits. This interest rate differs from one bank to another. For example, at India’s largest public sector bank, State Bank of India, the interest rate on savings bank deposits is 2.70% for account balances of up to INR 1 lakh.
Benefit: Savings accounts are the most convenient way to earn interest on idle funds in banks.
2. Current Account
Current accounts are generally used for business transactions in which funds are frequently transferred between financial accounts. These accounts are best suited for daily business transactions by corporations and business owners.
Key Characteristics of a Current Account
Limit: There is no limit to the amount of money that can be deposited into a current account. Current accounts do not have a transaction limit either.
Balance: A current account requires a higher minimum balance than a savings account.
Interest: Banks do not pay interest to customers on Current accounts.
Benefit: These accounts provide an overdraft facility, allowing customers to withdraw more money from the account than is actually in the account.
Conclusion
Banking in India is custom fit by the public and private sectors to meet a variety of needs for various age groups and genders in order to equip all citizens with financial capabilities. As the country takes small but bold steps toward financial inclusion, citizens’ awareness and knowledge will go far toward empowering the nation’s collaborative efforts to grow together. Once you understand the different types of bank accounts that most banks provide, you can start deciding which option is best for you.
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