Types of deposit schemes available in Indian Banks
People deposit money in Banks mainly due to the liquidity and safety it offers for their money. Traditionally, banks had mainly 4 types of deposit schemes; Savings Bank Account, Current Account, Recurring Deposit Account and Fixed Deposit or Term Deposit Account. In recent years, owing to increase in competition in the Banking sector, many banks have started to roll new schemes which combine the features of 2 or more deposit schemes and these are given different names by different banks.
Types of deposit schemes
Savings Bank Account
One of the most popular deposit schemes for individual account holders. These accounts are mainly opened for liquidity and safety of funds, along with the convenience of daily expenses, and with the added benefit of interest income. Till 24th Oct 2011, the interest on a savings account was fixed at 4.00% on the basis of the daily account balance and this was under the regulation of the RBI. Post Oct 25th, 2011, RBI has changed the interest rate for savings account and now banks can decide the interest rate with certain regulations imposed by the RBI.
Since there is no limit on the number of transaction or on the amount, this account is mainly maintained by firms, businesses and organisations. The overdraft facility can be availed with this account and no income can be earned from these accounts in the form of interest rates. In fact, banks charge some service charge for these accounts. At Vijaya Bank, the minimum amount for opening and maintaining a current account is as low as 500/-.
Recurring Deposit Account
This account is mainly for saving purpose and for those who do not have a lump sum amount in savings. Hence in this scheme, a fixed amount is invested on a monthly basis for a pre-fixed term. Recurring Deposit or RD account gives higher interest rates than the savings account. This scheme is best for fulfilling long-term goals like education for your children, future savings etc. Besides fixed RD instalments, some banks offer flexible/variable RD in which customers can deposit varying higher monthly instalments with a fixed upper limit. One can even opt for auto transferes to the RD on a monthly basis from their savings account, as per the standing instructions given to the bank. Premature withdrawal of the accumulated amount or default in paying the monthly instalments can attract a penalty. These accounts can be opened in single/joint names.
Fixed/Term Deposit Account
The main purpose of this scheme is to invest funds for getting higher interest rate. The tenor is fixed, and hence the name fixed deposit account. There are various tenor periods, and longer the tenor period, higher the interest rate. In most cases, the FD amount is paid in lump sum on reaching the maturity, but there are options in which the interest can be paid quarterly or even monthly (with a marginal discount in interest rate). At Vijaya Bank, the FD amount can be as low as Rs.50/- and it can be deposited for any days ranging from 15 days up to 10 years.
These are the 4 main types of deposit schemes, but with change in time, these schemes get modified and new variations are rolled out by banks. Choose the right scheme based on your requirement and make the most of your hard earned money!