Overview of Savings Account
Banks offer the customers different types of accounts for their deposits such as Savings account, Current account, Fixed Deposit account, Recurring account, etc. The customers can open an account with the bank as per his/ her needs, time horizon for deposits and objectives.
What is a Savings Account?
A Savings Account is offered by all the banks in India. It is the very common and basic product provided by the banks to the customers. It is the most popular financial instrument available in India. It offers an interest on the deposit. It can be opened by any individual. Savings account allows you to keep your money in a safe place wherein you earn an interest every month on this money.
Savings Accounts are one of the major sources of funds for banks. Savings accounts help you to save and transact with ease. Along with providing cheque facility these accounts also provide a lot of flexibility in deposits and withdrawal of funds from the account. Banks also offer current account and you can check out the difference between Savings Account & Current Account.
After the launch of Jhan Dhan Yojana by the Prime Minister Shri Narendra Modi, there has been a sharp increase in the number of savings accounts in India.
Benefits of a Savings Account
- Keeping your money in safer instrument
- No lock-in period
- There is no minimum or maximum period of holding money in savings account
- Liquidity of funds at any time
- To earn a regular interest
- To get an ATM Card or debit card
- Banks offer many services to the savings account holders
- Making online transactions like paying your bills, train ticket booking, online purchases, etc.
- Account statement/ passbook of savings account acts as a residential proof of the account holder
Features of a Savings Account
- A minimum average balance is to be maintained by the account holder except some types of account like salary account or no frills account.
- Higher liquidity
- Limited number of free financial transactions
- Cheque book and Passbook facility
- Minimum balance requirements
- Debit Card is issued to the account holder
- ATM allows 24-hour withdrawals
- Provision for nomination
- Internet banking facility
- Account holder can place standing instructions
- Loan is not available against deposit kept in savings account
- Availability of ECS Option
- SMS Alerts facility
- Free Mobile App
- Discounts or offers on transaction done using debit card/ mobile app/ net banking
Disadvantage of a Savings Account
The only disadvantage with a savings bank is that it offers very low interest as compared to other investment avenues such as bank fixed deposit, liquid fund of mutual fund, etc. Actually, the interest that you earn on money kept in savings account is so low that it even doesn't meet the rate of inflation.
Minimum Account Balance of a Savings Account
There are various types of savings accounts in which you need to maintain a pre-defined average monthly balance of in the account in order to avoid penalty charges. Hence, it is necessary for you to know beforehand as to how much minimum average monthly balance has to be maintained in your SB account. Generally, you can find such details on the respective bank's website as well.
Eligibility Criteria for Opening a Savings Account
- A person who is a resident Indian, non-resident Indian (NRI), Hindu Undivided Family (HUF) or foreign national can open a savings bank account.
- Minors can also open a savings account but a guardian should also be appointed in such accounts.
Savings Account is Suitable for Whom?
Savings account is best suited for salaried employees or any other persons having a regular income who want to keep their money in a safer place and earns good returns as well.
Types of Savings Accounts
(1) Salaried Account
These account for opened for salaried employees. They are opened by the employers and are zero balance accounts. Monthly salary of the employees is credited directly to these accounts by the employer.
(2) Regular Savings Account
It is a very common savings account offered by all the banks. It provides a fixed interest on the deposit maintained by the account holder in the account. If provides debit card, net banking facility, chequebook, passbook/ account statement, etc. to the account holders.
(3) Women's Savings Account
Women's Savings Account is targeted to women customers. These accounts offer special features and benefits like privilege cards, free insurance cover, special discounts, additional offers, etc. Cashbacks and exciting offers on Women's Debit Card are also available.
(4) Customised Savings Account
Customised Savings Accounts are offered by the banks to cater to different target groups to suit different needs of such customers. Examples of such accounts are Privilege banking account, 3-in-1 account which gives Banking, Trading and Demat accounts in one account, Goal-oriented account, etc.
Additional benefits are provided in these types of account by the banks. The banks may levy some extra charges for the same.
(5) No Frills account
No Frills account enables you to bank with a zero minimum balance and it has a stipulated minimum average balance. It is suitable for the persons who have limited cash flows.
In case, the balance in this account crosses Rs 50,000 or cumulative value of all the transactions in this account crosses Rs. 1 lakh in a financial year, it will be no longer a no frills account.
(6) Senior Citizen Savings Account
This type of account is targeted to the customers aged above 60 years. The banks provide special & additional facilities to these account holders like Dedicated Senior Citizens Desk for them, no minimum balance, higher interest rates, unlimited cash transactions at branches, etc.
(7) Children's Savings Account
In order to encourage a regular saving habit in the children, banks have introduced this account. It is a special type of joint savings account in which one of the joint account holders is less than 18 years old and one of the joint account holders must be the parent or guardian of the minor. There is no requirement of maintaining a minimum balance in such an account usually. Account holder can operate this account based on pre-set conditions by the parent or guardian.
(8) Sweep-in Savings Account
Sweep-in Savings Account facilitates you to earn higher interest on savings account by linking a fixed-deposit to your savings account. The additional amount of savings account is transferred to the fixed deposit account and thereby the account holder gets higher interest than a regular savings account.
(9) Pradhan Mantri Jan Dhan Yojana Savings Account
Pradhan Mantri Jan Dhan Yojana Savings Account is opened under PMJDY scheme. A Rupay Debit Card is issued to all the account holders. No minimum balance is required to be maintained by the account holder/s. Maximum of 4 withdrawals a month are allowed under this account. There is a free accidental insurance cover of Rs. 1 lakh provided to the account holder.
(10) Zero Balance or Basic Savings Account
In this type of savings account, you need not maintain any minimum average balance in you account which means you will not have to pay any penalty even if you withdraw all the amount from your account. It, however, offers you a debit card for making transactions.
Interest Rate on Savings Account
Usually banks offer an interest in the range of 3.5% to 4.5% on the deposits in Savings Account. Private Banks provide better rates as compared to Public Banks. Now-a-days, newly launched Payments Banks and Small Finance Banks offer 1% to 2% more returns than normal rates in order to increase their market share.
Interest on savings account is calculated on the daily available balance but the same will be paid on quarterly basis.
Checking Balance in Savings Account
One of the following modes can be used to check the balance available in your savings account:
- Through updated Passbook/ Bank's account statement
- Using Internet banking facility
- Making use of debit card at ATM Machine
- With the help of Mobile App
- Calling Customer Care Centre of your Bank
- By Visiting your Bank
Points to be noted with regard to Savings Account
- Research and open a savings account in a bank that offers maximum interest and other benefits
- Details of Service Charges related to Savings Account are available on bank's websites
- Penalty is levied if the balance falls below the minimum Average Balance required by the banks or if cheques are returned or on ECS failure
- There is a guarantee of providing interest on a savings account up to the first Rs 1 lakh balance in the account.
- Some of the banks also offer collection facilities to their customers
- Banks charge annual fees for Debit Cards
- The interest rate varies across banks after the Reserve Bank of India (RBI) deregulated it on October 25, 2011
- Interest in the savings account up to Rs 10,000 in one financial year is exempt from Income Tax w.e.f. financial year 2012-13
- It is mandatory to furnish the PAN (Permanent Account Number) details for cash transactions exceeding Rs. 50,000