CURRENT
DEPOSITS / ACCOUNTS
|
SAVING
BANK / Saving Fund DEPOSITS / ACCOUNTS
|
RECURRING
DEPOSITS / ACCOUNTS
|
FIXED
DEPOSITS / ACCOUNTS OR TERM DEPOSITS
|
Traditionally banks in India
have four types of deposit accounts, namely Current Accounts, Saving Banking
Accounts, Recurring Deposits and, Fixed Deposits. However, in recent years, due to
ever increasing
competition, some banks have introduced new products, which combine the features
of above two or more types of deposit accounts. These are known by different names in
different banks, e.g 2-in-1 deposits, Smart Deposits, Power Saving Deposits,
Automatic Sweep Deposits etc.
Current Accounts are basically meant for businessmen and are never used for the
purpose of investment or savings. These deposits are the most liquid deposits and
there are no limits for number of transactions or the amount of transactions in
a day. Most of the current account are opened in the names of firm / company
accounts. Cheque book facility is provided and the account holder
can deposit all types of the cheques and drafts in their name or endorsed in
their favour by third parties. No interest is paid by banks on these
accounts. On the other hand, banks charges certain service charges, on such
accounts.
Features of Current
Accounts :
(a) The main objective of Current Account holders in
opening these account is to enable them (mostly businessmen) to conduct their
business transactions smoothly.
(b) There are no restrictions on the number of times
deposit in cash / cheque can be made or the amount of such deposits;
(c) Usually banks do not have any interest on such
current accounts. However, in recent times some banks have
introduced special current accounts where interest (as per banks' own
guidelines) is paid
(d) The current accounts do not have any fixed maturity as
these are on continuous basis accounts
What is a Savings Bank Account ? Who
uses Saving Bank Accounts ?
These
deposits accounts are one of the most popular deposits for individual
accounts. These accounts not only provide cheque facility but also
have lot of flexibility for deposits and withdrawal of funds from the
account. Most of the banks have rules for the maximum number of
withdrawals in a period and the maximum amount of withdrawal, but hardly any
bank enforces these. However, banks have every right to enforce such
restrictions if it is felt that the account is being misused as a current
account. Till 24/10/2011, the interest on Saving Bank Accounts was
regulated by RBI and it was fixed at 4.00% on daily balance basis.
However, wef 25th October, 2011, RBI has deregulated Saving Fund account
interest rates and now banks are free to decide the same within certain
conditions imposed by RBI. Under directions of RBI, now
banks are also required to open no frill accounts (this term is used for
accounts which do not have any minimum
balance requirements). Although Public Sector Banks still pay only 4% rate
of interest, some private banks like Kotak Bank and Yes Bank pay between 6% and
7% on such deposits. From the FY 2012-13, interest earned upto Rs 10,000
in a financial year on Saving Bank accounts is exempted from tax.
What are Recurring Deposit
Accounts ? Who use Recurring Deposit Accounts ? or RD accounts
These are popularly
known as RD accounts and are special kind of Term Deposits and are suitable
for people who do not have lump sum amount of savings, but are ready to save a
small amount every month. Normally, such deposits earn
interest on the amount already deposited (through monthly installments) at the same rates as are applicable for
Fixed Deposits / Term Deposits. These are best if you wish to create
a fund for your child's education or marriage of your daughter or buy a car
without loans or save for the future.
Under these type of deposits, the person
has to usually deposit a fixed amount of money every month (usually a minimum of
Rs,100/- p.m.). Any default in payment within the month attracts a
small penalty. However, some Banks besides offering a fixed
installment RD, have also introduced a flexible / variable RD. Under these
flexible RDs the person is allowed to deposit even higher amount of
installments, with an upper limit fixed for the same e.g. 10 times of the
minimum amount agreed upon.
These accounts can
be funded by giving Standing Instructions by which bank withdraws a fixed amount
on a fixed date of the month from the saving bank of the customer (as per his
mandate), and the same is credited to RD account.
Recurring
Deposit accounts are normally allowed for maturities
ranging from 6 months to 120 months. A Pass book is usually issued wherein
the person can get the entries for all the deposits made by him / her and the
interest earned. Banks also indicate the maturity value of the
RD assuming that the monthly installments will be paid regularly on due dates.
In case installment is delayed, the interest payable in the account will be
reduced and some nominal penalty charged for default in regular payments. Premature withdrawal of accumulated amount
permitted is usually allowed (however, penalty may be imposed for early
withdrawals). These accounts can be opened in single or joint
names. Nomination facility is also available.
The RD interest rates paid by banks in India are
usually the same as payable on
Fixed Deposits, except when specific rates on FDs are paid for particular number
of days e.g. 500 days, 555 days, 1111 days etc i.e. these are not ending in a
quarter.
What
are Fixed Deposit Accounts in India or Term Deposits
All Banks in India
(including SBI, PNB, BoB, BoI, Canara Bank, ICICI Bank, Yes Bank etc.) offer fixed deposits schemes with
a wide range of tenures for periods from 7 days to 10 years. These
are also popularly known as FD accounts. However, in some other
countries these are known as "Term Deposits" or even called "Bond". The
term "fixed" in Fixed Deposits (FD) denotes the period of maturity or
tenor. Therefore, the depositors are supposed to continue such Fixed
Deposits for the length of time for which the depositor decides to keep
the money with the bank. However, in case of need, the depositor can
ask for closing (or breaking) the fixed deposit prematurely by paying paying a penalty
(usually of 1%, but some banks either charge less or no penalty).
(Some banks introduced variable interest fixed deposits.
The rate of interest on such deposits keeps on varying with the prevalent
market rates i.e. it will go up if market interest rates goes and it will come
down if the market rates fall. However, such type of fixed deposits have
not been popular till date).
The rate of interest for Fixed Deposits
differs from bank to bank (unlike earlier when the same were regulated
by RBI and all banks used to have the same interest rate structure.
The present trends indicate that private sector and foreign banks offer higher
rate of interest.
The earlier trend that private sector
and foreign banks offer higher rate of interest is no more valid these days.
However, now a days small banks are forced to offer higher rate of interest to attract
more deposits. Usually a bank FD is paid in lump sum on the date of
maturity. However, most of the banks have
also facility to pay/ credit interest in saving account at the end of every quarter. If one desires to
get interest paid every month, then the interest paid will be at a
marginal discounted rate. In the changed computerized environment, now the Interest payable on Fixed Deposit can also be
easily transferred on due dates to Savings Bank or Current Account of the customer.
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