Bank Account types, Savings, Current, Recurring, Fixed, FCNR, NRE, NRO

Savings Account Definition

Savings Accounts are the most popular type of bank accounts meant for saving of your amount and getting interest on it. You have the flexibility of deposit your fund to or withdraw your fund from the account based on your requirement. Banks provides cheque facility to savings account holders. It can be opened and operated either in single name or in joint names. Generally, all the salaried employees as well as the pensioners have this type of account. The rate of interest offered on such account is between 4% to 7% per annum. With effect from FY 2012-13, interest earned on savings account upto Rs 10,000 in single financial year is exempted from tax.

Savings Account Key Features

1. One of the the safest or smartest way to manage your savings.
2. It provides liquidity of funds.
3. Savings bank account is the most basic product of all the banks in India.
4. It is usually a non zero-balance account means the account holder needs to maintain a minimum account balance of a certain amount.
5. A penalty is levied upon the account holder for not maintaining the minimum balance as required by the bank.
6. Generally opened by salaried individuals.
7. It has daily withdrawal limits unlike current account where there is no such limit on withdrawal.
8. Usually, it has low interest rate, it offers an interest rate which is little higher than the rate of inflation.
9. It facilitates small savings with flexible amounts and tenures.
10. Issuance of ATM/ Debit Cards to the Account Holders.
11. It also offers the facility to the account holder to pay bills, make online fund transfer, make quick transactions, etc.

Current Account Definition

Current Account are opened to enable the account holders to conduct their daily business transactions smoothly. These deposits are the most liquid deposits and there is no restriction on the number and the amount of transactions in a day. These are not used for investment purpose as mostly the banks do not offer any interest on such accounts instead they deduct some service charges on such accounts. Generally, the current accounts are opened in the names of firm or company.

Current Account Key Features

1. Current bank accounts are operated to run a business.
2. It enables the businessmen to conduct their business transactions smoothly, faster and trouble-free.
3. No restriction on the amount and number of deposits or withdrawal.
4. Electronic payment facility is available.
5. Usual payments like wages and expenses can easily be managed.
6. Usually, bank does not pay any interest on current account but now-a-days, some banks have started paying interest on current accounts.
7. It offers overdraft facility.
8. It charges interest on the overdraft / short-term funds borrowed from the bank.

Recurring Account Definition

Recurring Deposit Account is opened by the persons who wish to invest an average amount to bank on a regular basis. These are also popularly known as RD accounts. This account is useful for those persons who do not want to invest a large amount at single instance. Banks usually have fixed installment RD but now-a-days some banks also offer flexible RD where the person can deposit even higher amount of installment than previous installment. Any default in payment within the month attracts a small penalty. These are available for different maturities starting from 6 months to 120 months. The account holders get a passbook showing entries for all the deposits made by them and the interest earned thereon. The account holders can withdraw the amount alongiwth the interest on maturity of RD. Premature withdrawal of accumulated amount is also allowed with little penalty on early withdrawals.

Recurring Account Key Features

• One of the best way of investment of your savings which is offered by almost all the banks in India.
• It facilitates small savings with flexible amounts and tenures.
• It inculcates a regular habit of saving for future needs.
• It is available from minimum of 6 months to a maximum of 10 years with monthly instalments of 12, 24, 36, 48, 60, 72, 84, 96, 108 and 120 months.
• It can be opened for monthly instalments of Rs 100 and thereafter, in multiples of Rs 100.
• Once the RD account becomes active, the customer can not change the amount of the installment or the tenure.
• Standing instruction for transferring the monthly instalments from the customer's SB / CA account is accepted.
• Very popular among the salaried class persons.
• Best for those who can afford to save only a few thousand rupees per month.
• Almost all the banks do quarterly compounding in case of RD.
• On maturity date, the RD holder is paid the maturity value i.e. the principal and the interest earned.
• RD accounts can be prematurely closed and banks generally deduct some penalty as per the clauses of the bank.
• Partial withdrawals are not allowed.
• A penalty is levied upon a delayed payment or missing installment.
• Some banks have a loan facility against the RD on pledging the RD as collateral.
• Nomination facaility is available.

Fixed Account Definition

Fixed Deposit Account are those accounts in which a fixed sum of money is deposited for a specified time usually for a period from 7 days to 10 years. A higher interest rate is offered on fixed deposits which varies from bank to bank according to the amount deposited and duration of investment. Private sector banks and foreign banks offer higher rate of interest as compared to public sector bank in order to attract more deposits. These are also popularly called as FD accounts. The account holders can withdraw the amount alongiwth the interest on maturity of FD. Premature withdrawal of accumulated amount is also allowed with little penalty on early withdrawals. Some banks also give facility to pay interest on quarterly or monthly basis on FD account.

Fixed Account Key Features

1. Maximum Investment Amount: No such limit
2. Interest Rates Variable: from 7 to 9% based on term
3. Interest earned is taxable: Yes
4. Lock in Period: No
5. Tenure: 7 Days to 10 Years
6. Income Tax Rebate u/s 80C: Yes upto Rs 1,50,000/- p.a., but on FD with a lock in period of 5 or more years
7. Maturity Value: Taxable
8. Premature Withdrawals: Entire amount, anytime but after charging a certain penalty
9. Risk: Risky as compared to PPF

NRO (Non-Resident Ordinary Rupees) Account

NRO (Non-Resident Ordinary Rupees) Account is opened by an NRI (Non Resident Indian)/ PIOs/ OCIs to deposit his/ her India based earnings in Rupees in India and to deposit future income earned in India such as rent, dividends etc. The types of account can be Savings, Current, Fixed Deposit or Recurring deposit.

NRO Account Key Features

1. Maintained in Indian Rupees
2. Can be Savings, Current, Fixed Deposit or Recurring deposit Account
3. Nomination is allowed
4. FD periods can be same as those of resident accounts
5. Has Non-Repatriable nature
6. Loan against FD account is permitted
7. Amount cannot be transferred from an NRO account to an NRE account
8. Interest earned is subject to Tax Deducted at Source (TDS)
9. In case of joint NRO account, NRI can have another NRI or a resident Indian (who should be a close relative) as a joint holder
10. NRO account is converted into a regular resident account, if the NRE account holder returns to India and becomes Indian resident

NRE (Non-Resident External Rupees) Account

NRE (Non-Resident External Rupees) Account is opened by an NRI (Non Resident Indian)/ PIOs/ OCIs to deposit his/ her overseas earnings remitted to India converted to Indian Rupees. Earnings of India cannot be deposited in this account. The types of account can be Savings, Current, Fixed Deposit or Recurring deposit.

NRE Account Key Features

1. Maintained in Indian Rupees
2. Can be Savings, Current, Fixed Deposit or Recurring deposit Account
3. Nomination is allowed
4. Transferring money from the resident country to India is free
5. Person can deposit only foreign currency in this account which gets converted into Indian Rupees at the time of deposit
6. Funds can be transferred from an NRE account to an NRO account
7. Interest earned on this account is not taxable in India
8. International debit card is issued to the account holder
9. Has Repatriable nature
10. In case of joint NRE account, both the parties should be NRIs
11. NRE account is converted into a regular resident account, if the NRE account holder returns to India and becomes Indian resident

FCNR (Foreign Currency Non-Resident) Account

FCNR (Foreign Currency Non-Resident ) Account is opened by an NRI (Non Resident Indian)/ PIOs/ OCIs for keeping money denominated in US dollar, pound sterling, Yen, Euro, Australian dollar & Canadian dollar (other than Indian Rupees). These accounts can be Term Deposit only.

FCNR Account Key Features

1. Maintained in US dollar, pound sterling, Yen, Euro, Australian dollar & Canadian dollar
2. Cannot be maintained in Indian Rupees
3. Can only be a Fixed Deposit type
4. FD tenure should not be less than 1 year and not be more than 5 years
5. Entire deposit i.e. principal and interest earned is exempt from income tax in India
6. Nomination is allowed
7. Has Repatriable nature
8. Foreign currency loan in India is permitted to the account holder against this FD Account
9. In case of joint FCNR account, NRI can have another resident Indian (who should be a close relative) as a joint holder