Banks In India
Indian Nationalized Banks
A savings account is like a safe where you keep your precious items – except that in this kind of safe you can earn money for what you put in it for safekeeping! One of the most basic benefits of a bank is having a savings bank account. But what exactly is a savings bank account? What are the various kinds of savings accounts? How do you open a savings bank account? Read on to find out the answers to all these questions and more….
What is a Savings Bank account?
A savings bank account is one of the most popular types of bank accounts held by individuals - while current accounts are more favourable for businessman and retail enterprises. A savings account allows you to keep your money safely while you earn money on it as interest. The bank pays you money to allow them to hold your money. The interest rate is usually a little above the inflation rate. A savings account allows a cheque book facility and allows holder to make cash deposits and withdrawals. It is one of the easiest kinds of bank accounts to operate. While there are some restrictions regarding the maximum number of withdrawals within a fixed period, and the maximum amount that can be withdrawn, these restrictions are generally not enforced, unless they are misused by the customer on the rare occasion.
Here are some of the main features of a regular savings account:
Interest income: Savings accounts offer interest on the money held in the account. On the other hand, current accounts do not earn interest. The RBI had earlier allowed banks to pay only a fixed interest rate of 4% p.a. on the daily balance held in savings accounts. However, in 2011, the RBI deregulated the interest rates offered by banks on savings accounts. As a result, now each bank is free to set its own interest rate, (within the framework of certain RBI rules).
Flexibility: Another feature of savings accounts is that they offer account holders a lot of flexibility in terms of withdrawal or deposit of cash. You can put in or take out money whenever you want to. This is unlike other kinds of accounts like a fixed deposit or recurring deposit account. A fixed deposit (FD) account, for example, does not have the easy liquidity of a savings bank account. If you are in urgent need of money, you might need to pay a penalty for breaking the deposit and making a premature withdrawal. Your money in an FD or Recurring Deposit account (RD) is locked for the tenure of the investment and you can make withdrawals before the maturity period only on paying a penalty. Similarly, you cannot make a partial withdrawal of your money from an RD. You would need to close the account completely and withdraw the entire amount. A savings bank account poses none of those problems.
Tax benefit: You also get some tax benefit on keeping money in a savings account. From the financial year 2012-2013, interest income earned from a savings account of up to Rs. 10,000 a year is exempt from tax.
Regular Savings Account
Savings accounts that require a minimum average monthly balance are known as regular savings accounts. This is in contrast to basic savings accounts that do not require any minimum opening payment or minimum balance. In line with the Government of India’s push for financial inclusion for all, the RBI directed banks to offer ‘no frill’ accounts that have special features to encourage such inclusion. Regular savings account do not have these features.
Why open a Savings Account?
A savings account offers several benefits including easy liquidity, interest income, and ease of operating the account.
Liquidity: Unlike an FD or RD account, you do not need to make a minimum deposit amount at fixed intervals. You can deposit and withdraw money from a savings account as per your requirements, without the fear of penalty fees.
Interest income: While you earn less interest in a savings account as compared to an FD or RD account, you also have far greater freedom in operating the account and are not limited by strict rules on withdrawals and deposits. With the deregulation of interest rates, you can shop around for banks that offer competitive rates on such accounts.
Paying bills: With the advent of digital banking, it is extremely easy to pay bills, transfer funds and conduct various banking transactions with a savings account.
Safety: It is definitely better to store your money securely in a bank rather than keeping it under your mattress!
Salary-based Savings Account
A salary account is a kind of savings account. It is usually opened by your employer. The choice of bank is determined by your employer and your salary is paid into that account. Generally, salary accounts do not earn interest. However, there may be other perks to the salary account. These could include
-zero balance facility- while most savings accounts require a minimum balance in the account, salary accounts in India might not have that requirement
-waiver on fees on your debit card
-special discounted loan rates
-more number of free cash withdrawals from the ATM.
Each bank will offer different benefits to customers holding a salary account with them. The benefits depend on the relationship between your employer and the bank, the size of the relationship, and the facilities negotiated by the employer.
Do keep in mind that once you resign your job, you will no longer be eligible for the benefits offered by the bank for the salary account. Typically, if your salary is not credited into the salary account for a specified number of consecutive months, it is converted into a regular savings account.
Savings Account for Senior Citizens
Several banks offer unique benefits to senior citizens holding a savings account. The age criteria may vary with each bank. The benefits could include cash delivery at home, discount on locker rental fees, discounts on medical expenses, or even guidance on writing a will. Some banks may offer a dedicated Senior Citizens Desk at their branch to help older customers with their banking needs.
In addition to having a regular savings account, senior citizens can also opt for the Senior Citizens Savings Scheme (SCSS). It is open to any senior citizen of age 60 and above; or younger, subject to certain conditions. NRIs and HUFs are not eligible to open this account.
A SCSS account offers a higher rate of interest than a regular savings account. Typically the maturity period is 5 years.
Savings Account for Children and Minors
Several banks offer savings account for children with attractive benefits. The reasons for opening a savings account for a child or minor (under the age of 18) could include:
-enabling the child to become financially literate at an early age
- developing the habit of saving in the child
- saving for the child and ensuring that they have a corpus on attaining majority age.
There are a variety of other perks to having a savings account for a child. Banks could offer the child an ATM card with the child’s name on it (subject to permission from the parents); an ATM withdrawal limit and a daily shopping limit; free vouchers for movies or books per quarter; or discounts at certain kid-friendly retail outlets. Having a savings account, under the supervision of a parent/guardian also helps children to learn spending discipline and helps them safely learn how to operate a bank account.
Some banks also offer benefits to the parents with a children’s account including Education Insurance to cover education expenses of the child in case of untimely death by accident of the parents or guardian.
Once the child turns 18 and becomes a major, the account can be converted into a regular savings account.
Savings Account for Women
There are exclusive benefits for savings accounts for women and these will vary from bank to bank. This could include exclusive offers on the debit card issued with the account, discounts on locker rental at the bank, entertainment or dining offers, higher ATM withdrawal limits and/or free cash withdrawals at ATMs, preferential rates on home loans, life insurance cover and coverage for a range of women-focused illnesses like breast or cervical cancer, and discounts on woman-oriented health check-ups.
The eligibility is very basic – any resident woman above the age of 18 years is eligible to apply to open this type of savings account.
Zero Balance Savings Accounts
A zero balance savings account simply means that you do not need to keep a minimum balance in the account for it to remain functional. Most banks have a minimum balance requirement for their savings accounts– typically ranging from Rs. 500 to Rs. 10,000 depending on the bank. There is a different monthly average balance for urban and rural areas. However in a zero balance account, you do not need to keep this minimum amount of cash in the account.
There are various kinds of savings accounts that could be classified as zero balance savings accounts:
Salary accounts: These are accounts opened by your employer and your salary is paid into that account. Typically, banks do not offer interest on this kind of savings account. However, on the plus side, you do not need to keep a balance in the account and can transfer all your money to other accounts as soon as you receive your salary, if you so wish.
Children’s savings account: Some banks could offer a zero balance facility for accounts opened by children or minors, under the supervision of a parent or guardian. This could be linked to an offer for the parent’s account opening. Minors under the age of 18 are eligible to open a children’s savings account.
Basic savings account under financial inclusion programme: As per the RBI directive of 2005, banks need to offer savings accounts with zero balance facility for many of those who might not be able to afford/ or may not want to keep a cash balance in their savings account. There is no initial payment required to open the account. These are ‘no-frills’ accounts that are targeted at achieving financial inclusion. These accounts do not offer any elaborate benefits, but at the same enable individuals to hold a savings account in a bank, without having the financial pressure of keeping a minimum balance.
The term ‘no frills account’ has now been changed officially to Basic Savings Bank Deposit (BSBD) accounts. They require minimum documentation, only KYC documents. The banks are also directed to offer an ATM/Debit Card free of charge to such account holders. Furthermore, no penalty fee is charged for accounts that are not operative, nor is any fee charged for reactivating a dormant account.
Indian residents above the age of 18 are eligible to open this type of account.
Eligibility to open a Savings Bank Account
Any individual above the age of 18 years can open a savings account. In general, the following individuals are eligible to open a regular savings account in India:
-Resident Individuals above 18 years (sole or joint)
-Hindu Undivided Family (HUF)
-Resident foreign nationals (with the requisite documentation)
Of course, there are many kinds of savings accounts, each of which has its own eligibility criteria. For instance:
Savings account for senior citizens: You need to be above 60 years of age.
Savings account for children: Need to be below 18 years of age, and have a guardian/parent
Savings account for women: Applicants need to be women above 18 years of age.
Savings accounts for high net worth individuals: Applicants will need to maintain a high minimum Monthly Average Balance (MAB)
Documents required to open a Savings Bank Account
The kind of documentation required to open a savings account varies with each bank and with each type of savings account.
However, all savings accounts will require the following documents:
1. Identity proof
2. Address proof
3. Latest passport-sized photographs
Most banks will ask for self-attested copies and originals for verification. The list of documents that are commonly valid for ID or address proof include:
Voter ID card
Permanent Driver’s License
Job card issued by NREGA
Identity card issued by the Central/State Government, public sector undertaking or public financial institution.
4. If you are applying for a specific type of savings account, you will need the appropriate documents. For instance, if you are applying for an account which requires a high minimum monthly average balance, you might need to show additional income proof.
Best Savings Accounts in India
There are numerous banks in India that you can choose from. Each has its own features that may or may not suit your requirements, so there is no single bank that can be said to offer the best savings account. You need to choose what suits your needs the best – and remember that what works best for you might not necessarily be the best option for someone else.
You could look at three main factors when deciding which savings bank account is best for you:
1. Interest rate: After the RBI deregulated interest rates on savings bank accounts, each bank has the freedom to set its own rates. Research what the interest rates of the various banks are and which banks offer the best rates.
2. Customer service: You will be transacting very often on your savings account, so it is important to know that the bank offers good customer service. Talk to your family members, friends, colleagues to find out if they have recommendations and if they are happy with their bank’s service.
3. Location: With the advent of NetBanking and Mobile Banking, it is not essential to have a bank that is located physically close to your home or work place to carry out all your bank work. However, you might feel more comfortable having a bank that is relatively close to your home or office. Also, while Bank X might offer high interest rates on a savings account, they might not have a branch in your town.
4. Any perks or benefits that accompany the account – for instance, a savings account specifically targeted at women might make a good choice for women, as opposed to a general savings account open to all.
There is not much that separates the savings account options of the various banks but you can keep some of these above factors in mind when deciding which choice is most suitable for you.
Top Savings Account Interest Rates in India
With the RBI deregulating interest rates, banks have the flexibility to set their own interest rates. While there is some competition between banks to attract customers with, many banks continue to offer a standard 4% per annum for savings accounts. However, there are some banks that offer higher interest rates, depending on the balance in the account. Some banks like Ratnakar Bank (RBL), Yes Bank and Kotak Bank offer higher interest rates depending on the balance in the account. However, it is important to keep in mind that these rates are fluid and can change at any time. It is best to check the latest rates offered by the banks before making a decision.
How to open a Savings Bank Account Offline
It is simple to open a savings account manually.
-Once you have decided on the bank and branch, simply visit the branch with the required documentation (including self-attested ID proof, Address proof and latest passport sized photographs).
-Ask a bank representative for an account opening application form and submit it with the documents for verification.
-The documents will be submitted for processing.
-If the documents are authenticated, you will be notified of details of your account within 2-14 working days, if not earlier.
Check on the documents required, originals and copies to be submitted. The list of approved ID proof documents include Passport, PAN card, Voter ID card, Permanent Driver’s License, Aadhar Card, NREGA job card, and ID card issued by the Central or State Government, public sector undertaking, or public financial institution. In particular cases, the bank might accept a range of other ID documents as well.
How to open a Savings Bank Account Online
It is equally simple to open a savings account online. However, remember that not all banks allow online account opening.
-Once you have chosen your bank, log on to the bank’s website.
-Check if you can open an account online
-Fill in the account opening form for the specific kind of savings account you have chosen, and upload the necessary documents as ID and address proof, along with photographs.
-The bank might require additional documents or might have a representative contact you for further details.
-On successful completion of the verification process, you will be informed of the details of your account and will be able to start operating it.