Salient features of Different Deposit Products and Services available in banks

A deposit generally refers to money held in a customer’s bank account. Banks offer different types of deposit accounts to their customers with diverse features. Let us understand the types of accounts available to Bank customers

Savings account

Savings Bank (SB) accounts are opened mainly for saving purposes. Customers cannot open an SB account for business purposes.   Though the interest rates may not be high, savings accounts provide a modest return on your deposits, contributing to your savings growth over time. The customers enjoy chequebook facility, debit card facility, UPI, NEFT, and RTGS facilities for operating the account and doing different transactions through their Accounts.

To know the details of who is eligible and who is not eligible to open SB accounts, Read the following post “Who can open Savings Bank (SB) Account in Banks?”

Current Account

A Current Account is a type of running deposit account offering a significantly higher number of transactions and services suitable for businessmen, professionals, or entrepreneurs who can use it to manage their daily and monthly cash flow seamlessly, without worrying about the limit on the number of transactions. A Current Account is a type of running deposit account offering a significantly higher number of transactions and services suitable for businessmen, professionals, or entrepreneurs who can use it to manage their daily and monthly cash flow seamlessly, without worrying about the limit on the number of transactions. No interest is paid on deposits held in the Current account. The customers enjoy chequebook facility, debit card facility, UPS, NEFT, and RTGS facilities for operating the account and doing different transactions through their Accounts.  Current accounts often provide additional business banking services, such as the issuance of business cheques, online banking platforms tailored for businesses, and merchant services to accept card payments.

Recurring Deposits

Under the scheme, the account holder has to deposit a pre-decided fixed amount every month to his recurring deposit account for a specific period.  The minimum deposit per month accepted in public sector banks is Rs.100/- and varies from Rs.500 to Rs.1000 in private sector banks. The maturity value of the deposit will depend on the amount of investment, the duration of the deposit, and the interest rate. You can tweak your tenure between six months and ten years according to your target of savings. However, the tenure of the deposit and monthly installment once decided at the time of opening the deposit cannot be altered in the middle.

To know more read “WHAT IS RECURRING DEPOSIT (RD)?

Fixed Deposits

Fixed Deposits are deposits where a particular sum of money is invested for a fixed duration. The duration of Fixed Deposits is flexible. It can range from 7 days to 10 years. The rate of interest for the Fixed Deposit depends on the period for which the funds are locked in.

Just like a Recurring Deposit, a Fixed Deposit amount cannot be withdrawn until the maturity period. Premature withdrawal is allowed after the bank charges a penalty in the rate of interest. Most of the public sector allows you to open fixed deposits with a minimum amount of investment for a Fixed Deposit of as little as Rs.1000. In some private banks minimum deposits are allowed for Rs.5, 000/10000, etc. The rate of interest on the Fixed Deposit offered by different banks varies based on the deposit period. Some banks provide the option of a sweep-out facility where the amount above a particular balance in a Savings Account is automatically converted to a Fixed Deposit. This helps the Savings Account earn more interest. You can avail loans of up to 90% on the principal and also on the interest accrued. You can close your deposit prematurely without any difficulty.

Reinvestment Deposits

This product is a variant of Term Deposits but instead of Interest being paid out at a regular frequency during the period of deposit; here it is paid out only at the time of maturity. Regular interest is added to the principal and compound interest is calculated and paid thereon.

FCNR (B) and NRE deposits

FCNR (B) deposits and NRE deposits can be opened by Non-Resident Indian persons of Indian Origin (PIO) or Overseas Citizens of India (OCI). The FCNR-B (Bank) deposits are maintained only in Foreign Currencies term deposits and maturity of these deposits is payable in terms of Foreign currencies including interest accrued on those deposits.

The interest rate offered by Banks in India on FCNR deposits is more than the interest offered on deposits from their counterparts abroad. However, the interest offered on NRE deposits in India is much higher than the interest offered on FCNR-B (B=Bank) Deposits in India. The higher rate of interest offered on NRE deposits sometimes works as a cushion to offset the exchange loss in the eventuality of the Indian Rupee depreciating against a specific foreign currency at the time of maturity of the deposit. The non-resident bank customers who do not want to take exchange risk go for FCNR (B) deposits. No bank shall accept or renew FCNR (B) deposits over five years and no recurring deposits shall be accepted under the FCNR (B) Scheme. Currently, the overnight alternative reference rate (ARR) for the applicable currency/swap plus 250 basis points for deposits with maturities of 1 year to less than 3 years and overnight ARR plus 350 basis points for deposits with maturities of 3 years and above and up to 5 years are the maximum interest rates that can be levied on foreign currency non-resident bank (FCNRB) deposits. Scheduled Commercial Banks shall, at their discretion, decide the currency-wise minimum quantum on which differential rates of interest may be offered. However, the interest rates on all deposits, including where differential rates of interest are offered, shall be subject to the overall ceiling prescribed on FCNR(B) deposits.

NRE Deposits:

NRE deposits can be opened by Non-Resident Indian persons of Indian Origin (PIO) or Overseas Citizens of India (OCI). Funds deposited in an NRE Fixed Deposit originate from foreign earnings and are maintained in Indian Rupees after the conversion of foreign currency into Indian Rupees. Accounts can be maintained in SB, CD as well as in term deposits. Deposits in NRE- FDs or NRE -SB are tax-free. The depositor’s capital and interest are both freely repatriable to his or her home country. Interest rates on NRE deposits must not be higher than those provided by the banks on equivalent domestic rupee term deposits, according to prevailing guidelines.

 To know more read: DIFFERENCE BETWEEN FCNR (B) AND NRE DEPOSITS

NRO Deposits

An NRI (Non-Resident Indian)/PIO (person of Indian origin)/OCI (Overseas Citizen of India) is permitted to rent out their properties in India and he/she is eligible to repatriate local receipts like rent, dividends, the settlement from the past employer towards, P.F; gratuity sale proceeds of assets, received in India. NRO accounts are opened in India, with a view to credit such legitimate local income to the beneficiary’s account. NRO accounts may be opened /maintained in the form of current, savings, recurring, or fixed deposit accounts. The remittance from abroad may also be deposited in the NRO account.

To know more read: WHY THE NRIS NEED NRO ACCOUNTS?

Residents Foreign Currency (RFC) Account:

Returning Indians, who have been outside India for a continuous period of not less than one year and have become residents on or after 18.04.1992 are eligible to open a Residents Foreign Currency (RFC) account in AD Bank.RFC account can be held in a term deposit, savings, or current account form in foriegn currency such as USD, GBP, Euro, Japanese Yen, etc. The term deposit account can be maintained for 1 year to 3 years. You can use RFC funds for any remittances or investments abroad. You can also use the funds for the maintenance of dependents or any personal purposes abroad. You can also use these funds for expenses and investments to be made in India.
Permitted Credit to RFC account:
Balances held in NRE/FCNR deposit accounts.
Assets held outside India at the time of return can be credited to such accounts.
Forex received as gifts or inheritance.
Proceeds of insurance claims/ maturity/ surrender value settled in Foreign Currency
Salary/Pension/ Royalty etc., received in forex.
Currency Notes/TC brought into India at the time of returning India.

Tax saving deposits

An individual or HUF who has opted for the old income tax rule can invest in Tax saver fixed deposits of banks, not exceeding the aggregate limit of Rs.150000.00 u/s 80 (C) of IT in a financial year is eligible for tax relief. The ‘deposit’ can be opened in a single name or joint name of an adult with a minor or in the joint name of two adults, payable to either or the survivor. The joint account cannot be opened for more than two people. In the case of joint accounts, only the first-named person in the ‘Tax Saver Deposit’ can claim the tax rebate.

A person can deposit money in tax saver FDs through any public or private sector bank except for cooperative and rural banks. Investment in Post Office Time Deposit of 5 years also qualifies for deduction under section 80 (C) of the Income Tax Act, 1961.

Read: TAX SAVING FIXED DEPOSITS: DUAL BENEFIT OF TAX SAVING WITH ASSURED INTEREST

Capital gain accounts in banks

Section 54 of the Income Tax Act provides an exemption from tax on long-term capital gains arising out of the sale of a house if the gains are invested in the purchase of another house either a year before or within two years from the date of transfer, or used for construction of a house within three years of the date of transfer. As it may take time to search for and buy a new house or construct a house on open land, the individuals and HUF can in the meantime open a CGAS account and deposit the sale proceeds in that account to avail of the exemption from long-term capital gain tax. The authorized/ approved branches of the public sector banks viz. Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India,  Indian Bank, Indian Overseas Bank, Punjab National Bank, Punjab & Sind Bank, State Bank of India, UCO Bank, Union Bank of India, are permitted to open an account under CGAS. Rural branches of these banks are not included in the authorized list of banks to open CGAS.

To know which types of capital gain accounts can be opened Read: CAPITAL GAIN ACCOUNT IN BANKS: ALL YOU NEED TO KNOW

To know more about the rules related to the addition or deletion of names in FD, TDS in case of joint accounts, interest calculation in a leap year, conditions for deposits held in a minor’s name,  transfer of fixed deposits,  interest payment on prematurely closed deposits, renewal of Overdue deposits, and deposits in the joint names of Resident and Non-Resident, etc. Read: BANK DEPOSITS: EVERYTHING YOU NEED TO KNOW

Bank finance to customers

Bank finances to customers

Banks lend various types of credit facilities to their customers viz. Demand Loans,  consumer loans, home loans, education loans, term lending,  working capital finance,  export credit, Bank Guarantee, Letter of credit, etc. Banks also extend facilities like Overdrafts, Bill finance, leasing finance, Hire-purchase finance, etc. To know
more details read: BANK FINANCE OF DIFFERENT TYPES

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