Traditionally banks in India have these types of deposit accounts:
● Current Accounts: A current account is always a Demand Deposit and the bank is obliged to pay the money on demand. The Current accounts bear no interest. Instead, banks charge service charges on these accounts. They provide the convenient operation facility to the individual / firm.
● Saving Accounts: These 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 money from the account.
Savings deposits are subject to restrictions on the number of withdrawals as well as on the amounts of withdrawals during any specified period. Further, minimum balances may be prescribed in order to offset the cost of maintaining and
servicing such deposits. Savings deposits are deposits that accrue interest at a fixed rate set by the commercial banks.
● Recurring Accounts: Fixed amount is deposited at regular intervals for a fixed term and the repayment of principal and accumulated interest is made at the end of the term. These deposits are usually targeted at persons who are salaried or receive other regular income. A Recurring Deposit can usually be opened for any period from 6 months to 120 months.
Normally, such deposits earn interest on the amount already deposited (through monthly instalments) at the same rate as are applicable for Fixed Deposits/ Term Deposits.
● Term Deposits:
When money is deposited with a “tenure” , it cannot be withdrawn before its maturity fixed at a particular time. Such deposits are called “Time deposits” or “Term deposits”. The most common example of Time deposits is “Fixed Deposit”. All time deposits are eligible for interest payments. Interest rate depends upon the tenure and amount of deposit. This rate varies from bank to bank.
● Reinvestment Deposits:
Reinvestment deposits are those where interest is compounded quarterly and paid on maturity, along with the principal amount of the deposit.
● Deposits of Non-resident Indians : There are several kinds of accounts available for non resident Indians , Persons of Indian Origin and Overseas Citizens of India. They are as follows:
Non Resident Ordinary Accounts (NRO):
Any person resident outside of India can open this account. Normally, when a resident becomes a non resident, his domestic rupee account gets converted into the NRO account. This helps the NRI to get his credits which accrue in India, for example rent or interest from investments.
Non-Resident (External) Rupee Account (NR(E)RA): This account was introduced as NRE scheme in 1970. It’s a Rupee
account and the NRI can remit money to India from the funds abroad. This means that depositor is exposed to the Currency rates risk.
Foreign Currency Non-Resident Account (FCNR): Foreign Currency Non-Resident Account Bank or FCNR (B) was first introduced in 1993. It replaced the existing FCNR (A) scheme. This account is opened by the NRIs in 6 designated
currencies as follows:
1. US Dollar (USD)
2. Great Britain Pound (GBP)
3. Euro (EUR)
4. Japanese Yen (JPY)
5. Canadian Dollar (CAD)
6. Australian Dollar (AUD)
Please note that FCNR account is opened ONLY in the form of Term Deposits and NOT in the form of Demand Deposits. The term is from 1 year to 5 years.